Optimism bounces back for businesses globally

Chart 1

Kuala Lumpur, 5 January 2010 - Optimism amongst Medium to Large Enterprises (MLEs) around the world has bounced back to give the Grant Thornton global optimism/pessimism index for 2010 an optimism balance* of +24%, compared to its lowest ever score of -16% this time last year. The International Business Report (IBR) survey of over 7,400 MLEs across 36 economies, now in its 18th year, also highlights a group of ten economies where businesses are more optimistic about the outlook for their economies than International Monetary Fund (IMF) forecasts might suggest.

SJ Grant Thornton’s Managing Partner, Dato’ N. K. Jasani said, “We are glad to announce that throughout the 5 years participating in this survey, business owners in Malaysia are most optimistic (+49%) this year compared to the years before.

Businesses in Malaysia and the Asia Pacific are positive that an upturn in the global economy has taken place and we foresee more positive signs in the second half of 2010.” Businesses in Chile, India, Australia, Vietnam and Brazil are the most optimistic in the world, all scoring over +70%. Close behind are South Africa, mainland China, Singapore, Canada and Hong Kong (which showed the biggest swing of sentiment from 2009) at +60% or higher.

At the other end of the scale, many eurozone countries remain pessimistic about the future; Italy, Denmark, Finland and France all scored +9% or lower with Greece (-23%) and Ireland (-42%) even more gloomy. Spain (-56%) and Japan (-72%) kept their places as the most pessimistic economies in the world, although even here the figures were slightly up on last year.

When compared to the IMF's GDP figures for 2009, economies that avoided recession (for example, Australia, mainland China, India and Vietnam) or suffered a relatively minor recession (such as Brazil, Hong Kong, Canada and New Zealand) all feature, not surprisingly, at the top of the league table.

Against the IMF’s GDP forecasts for 2010, however, an interesting picture emerges, with businesses in places as geographically diverse as Australia, New Zealand, Canada, Malaysia and Germany recording disproportionately higher optimism than might be expected (see figure 2).

 

Dato’ N. K Jasani commented, “The question is whether businesses in these economies can forecast their future more accurately than the IMF. Many governments, on reading these results, will hope their business community is right and that their GDP in 2010 will outstrip IMF forecasts as a result.”

The survey also found that expectations of increased revenues in 2010 came out highest (at +40%) when respondents were asked to rank likely business trends in 2010. Increased turnover was followed by the surprisingly positive view that investment in plant and machinery (+31%) and profitability (+29%) would both increase.

Businesses were much less hopeful about selling prices with 21 out of 36 economies less optimistic about increasing their prices than they were in 2009.

In Malaysia, business owners are very positive on expecting increased revenues (+60%), followed by investment in plant & machinery (+45%) and profitability (+41%).

Dato’ N.K. Jasani elaborated, “This suggests that during the recession businesses have become leaner and more cost effective. This may enable them to lower prices while still securing increased revenues and, crucially, profits. As the global economy emerges from recession, we are likely to see many businesses reaping the rewards of recession induced efficiencies to lead the way in the upturn.”

 

 

Figure 2

 

When asked about employment expectations in 2010, European businesses were far more pessimistic than their counterparts elsewhere in the world; a negative balance of -1% in Europe compared to balances of +33% and +42% in Asia Pacific and Latin America respectively. All countries who recorded negative balances for employment were European, led by Ireland, Italy (both -14%), France (-10%) and Spain (-8%).

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

Notes to editors:
About SJ Grant Thornton:
SJ Grant Thornton is a member firm within Grant Thornton International Ltd and provides assurance, tax, corporate finance, corporate restructuring and management consulting services.
The firm operates from its main office in Kuala Lumpur and its other offices in Penang, Johor and Kuantan.

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 2400 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), formerly known as the International Business Owners Survey (IBOS), provides insight into the views and expectations of chief executive officers, managing directors, chairmen or other senior executives over 7,400 Medium to Large Enterprises (MLEs) across 36 economies. Now in its 18th year, this unique survey draws upon trend data for most European participants and eight years for many non-European economies.

This year marks the fifth year the Malaysian firm is participating in the Global Report, now in its eighth consecutive year. For its previous involvement, the full results were previously launched in June 2007 by the former Deputy Finance Minister I Dato’, Dr. Ng Yen Yen and in July 2008 by the former Minister of International Trade and Industry Malaysia, YBhg Tan Sri Muhyiddin Yassin.

Grant Thornton International will donate US$5 to UNICEF for every completed IBR questionnaire.  In 2009, this has resulted in a donation of US$36,610. The research was conducted by Experian Business Strategies Limited.  To find out more about IBR and to obtain details of IBR reports and results please visit www.internationalbusinessreport.com.

Highlights of the 2010 International Business Report: optimism/pessimism

Asia Pacific (+64%, excluding Japan) was the most optimistic region, followed by Latin America (+48%) and North America (+24%). The European Union at +7% was the least optimistic by some distance.
Amongst the eurozone economies, Sweden (+39%) and Germany (+38%) ranked the most optimistic; Ireland (-42%) and Spain (-56%) the most pessimistic.
The biggest swing in sentiment was in Hong Kong which moved from deep pessimism last year (-49%) back to an optimistic +64% this year (a 113% rise).
Brazil, Chile, New Zealand, Malaysia and Taiwan all recorded their highest levels of optimism since they joined the survey.

Highlights of the 2010 International Business Report: economic expectations

An expectation of increased revenues was the most optimistic business trend (+40%) out of the eight respondents were asked to rank. Vietnam was most optimistic at +95% with Japan lowest, and the only negative country, at -9%.
Selling prices saw the least positive trend at +11%. Japan was most pessimistic at -46% with India most positive at +53%. Out of the 36 economies surveyed, 21 were less optimistic about increasing selling prices for 2010 than they were for 2009.
Expectations for employment were most subdued in the European Union with a balance of -1% pessimistic about trends for the next 12 months. This was compared with +42% in Latin America.

Economic performance compared with IBR results

The table below breaks down the 36 economies surveyed into groups based on their experiences during the global downturn and how they compare to optimism/pessimism sentiment expressed in the survey.