Businesses confidence on a knife edge heading into 2012

Kuala Lumpur, 3 January 2012: Global business confidence is balancing on a knife edge heading into 2012 according to new figures from Grant Thornton’s International Business Report (IBR). With the global economic outlook dominated by the crisis in the eurozone, fears are increasing that business growth will become even more difficult than in 2011.   The latest research shows that global business optimism in the fourth quarter of 2011 stands at net 0%, indicating a balance between those business leaders feeling optimistic about their economies in 2012 and those feeling pessimistic. It represents a further deterioration from 3% in Q3 2011 and 31% in Q2 2011.   The regional picture is, however, more nuanced. Optimism levels in the BRIC economies (up from 25% to 34%) and North America (up from 3% to 6%) have shown significant improvement over the last quarter. However, at the global level, this has been offset by a large drop in Europe where optimism fell from 0% to -17% in Q4. In the eurozone optimism fell from 2% to -16%.   Optimism level in Malaysia Businesses in Malaysia are less optimistic about the economy this year. Positioned at the bottom fraction on the optimism chart, the optimism level has dropped from +56% to -4%.   Our neighbouring countries are also not that optimistic. Singapore reports an optimism level of -4%, where else Thailand suffers a huge blow after the massive flood that crippled electronic and automobile factories, at -52%.   Dato’ N.K. Jasani, Managing Partner of SJ Grant Thornton, said: “Heading into 2012, we’re seeing a polarisation of business confidence between Europe and the rest of the world. However, the threat of total meltdown in the eurozone means business leaders remain uncertain about the year ahead – they simply do not know how things will turn out. That uncertainty is sapping confidence and choking business growth prospects.

“The business optimism results mirror the perilous position of the global economy; stronger results for key markets such as Brazil, China and the United States being offset by the lack of a clear resolution to the sovereign debt crisis in Europe.”   The research also suggests global trade is suffering. Having risen by 10 percentage points in Q3, the proportion of businesses citing a shortage of orders rose again in Q4, up five percentage points to 37% globally. This result was largely driven by an increase of nine percentage points across the eurozone, but businesses in North America (up seven) and the BRICs (up four) are also suffering.     Away from the economic gloom, the results from the United States provide a welcome and encouraging bright spot in the research. Expectations for increasing revenue and profits in the world’s largest economy in 2012 are both up by seven percentage points, to stand at 48% and 40% respectively. Further, net 35% of US businesses plan to hire workers over the next 12 months, up from just 17% in Q3.   Dato’ N.K. Jasani added: “Around the world, prospects for growth are mixed. Businesses are having to work harder than ever to maintain margins and competitiveness in the face of powerful economic headwinds. Vital to the situation improving or deteriorating is the fate of the eurozone.   “This threatens to undermine business prospects around the world, not just in Europe. Businesses in the higher growth economies such as China and Brazil remain positive for now but Europe is the world’s largest single market and consequently a key trading partner. The effects of a further downturn will resonate even in these high growth markets and beyond.   “Policymakers in Europe have some job on their hands in 2012. The concern for businesses is that a focus on austerity rather than economic growth is damaging their own growth prospects. Certainly, the resolution of the crisis and securing the future of the euro is top of their New Year’s wish list.”

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For further information please contact:
Sharon Sung
Technical & Corporate Affairs Partner
T +603 2692 4022
E sharonsung@gt.com.my

Notes to editors

About SJ Grant Thornton:

SJ Grant Thornton is a member firm of Grant Thornton International Ltd and provides assurance, tax, corporate finance, restructuring and other specialist services to private and public listed companies. With four offices across Malaysia – Kuala Lumpur, Penang, Johor Bahru and Kuantan, and access to more than 2600 partners in over 100 countries worldwide, we have invaluable local expertise supported by global reach.

About Grant Thornton International:

Grant Thornton International is one of the world's leading organisations of independently owned and managed accounting and consulting firms providing assurance, tax and specialist advisory services to privately held businesses and public interest entities. Clients of member and correspondent firms can access the knowledge and experience of more than 2600 partners in over 100 countries and receive the same distinctive, high quality and personalised service wherever they choose to do business.

Grant Thornton International strives to speak out on issues that matter to business and which are in the wider public interest and to be a bold and positive leader in its chosen markets and within the global accounting profession.

About IBR:

The Grant Thornton International Business Report (IBR) provides insight into the views and expectations of over 11,500 businesses per year across 40 economies. This unique survey draws upon 20 years of trend data for most European participants and nine years for many non-European economies. For more information, please visit: www.internationalbusinessreport.com.

Data collection

The research is carried out primarily by telephone interview lasting approximately 15 minutes with the exception of Japan (postal), Philippines and Armenia (face to face), mainland China and India (mixture of face-to-face and telephone) where cultural differences dictate a tailored approach. Telephone interviews enable Grant Thornton International to conduct the exact number of recommended interviews and to be certain that the most appropriate individuals are interviewed in an organisation which meets the profile criteria.

Data collection is managed by Grant Thornton International's core research partner - Experian Business Strategies. Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire. The women in business data will consists of responses gathered in Q4 2010 and Q1 2011, resulting an a global sample of over 9,000 respondents.

Sample

IBR is a survey of medium to large privately held businesses, researching the opinions of over 11,000 businesses annually. The target respondents are chief executive officers, managing directors, chairmen or other senior executives (title dependent on what is most appropriate for the individual country) from 39 economies primarily across five industries: manufacturing (25 per cent), services (25 per cent), retail (15 per cent and construction (ten per cent) with the remaining 25 per cent spread across all industries.

Locally, the sample tends to cover the industries mentioned previously, with some countries being able to have local valid data for specific sectors or regions when the sample size is large enough.