This is according to the latest Global Economic Conditions Survey (GECS) conducted by the Association of Chartered Certified Accountants (ACCA) and the Institute of Management Accountants (IMA).

The GECS report for the first quarter of 2025, released on April 10, surveyed thousands of finance professionals around the world, revealing a significant decline in the Confidence Index, reaching levels last seen at the height of the COVID-19 pandemic in mid-2020. The most pronounced collapse was observed in North America, where sentiment fell more steeply than in any previous quarter in the survey's history.

Jonathan Ashworth, chief economist at ACCA, commented on the findings, noting that while global growth has shown resilience in recent quarters, prolonged low confidence increases the risk of a self-reinforcing negative cycle. "With firms pulling back on orders, capital expenditure, and hiring, the economy could enter a deeper downturn," Ashworth said, adding that global trade tensions had worsened since the survey was completed, further increasing downside risks.

Alain Mulder, senior director of Europe Operations and Global Special Projects at IMA, suggested that the uncertainty surrounding new US policies on trade and government spending has significantly impacted confidence, alongside broader concerns about the global economic slowdown.

Photo: ACCA

According to the report, North America saw the most dramatic decline in confidence, driven largely by sentiment in the United States. Factors contributing to the downturn include the implementation of higher tariffs, cuts to federal spending, and persistent inflationary concerns. The Employment Index and Capital Expenditure Index for the region also fell sharply, indicating that firms are increasingly cautious about hiring and investment.

Despite these declines, the New Orders Index, often considered a leading indicator of real economic activity, rose slightly, suggesting that while sentiment is subdued, demand has not entirely collapsed.

"This divergence between confidence and new orders highlights the uncertainty that businesses face. While they may still be receiving orders, they are hesitant to commit to future investments without greater policy clarity," the report noted.

The CFO Confidence Index posted a modest improvement compared to the previous quarter, particularly outside North America. Finance leaders cited increased stability in some emerging markets and improved access to finance. However, the index remains below its long-term average, reflecting ongoing caution in corporate planning.

Although new orders rebounded strongly, expectations for capital expenditure and employment remained subdued, pointing to a wait-and-see approach among CFOs in the face of uncertain economic and regulatory conditions.

In contrast to North America, confidence in the Asia-Pacific region improved, bolstered by a rebound in sentiment from China. The recovery is attributed to several factors: renewed government stimulus efforts, optimism surrounding the development of artificial intelligence, and a recovery in domestic stock markets.

Exporters also benefitted from front-loaded orders early in the year, as trading partners sought to hedge against potential tariff escalations. However, the report cautions that the region’s resilience could face headwinds if trade tensions worsen or stimulus efforts falter.

Confidence levels in the United Kingdom and Western Europe improved slightly in Q1, albeit from very low bases. In the United Kingdom, sentiment had hit a record low in Q4/2024 amid political instability and economic stagnation. A rebound in new orders and easing inflation contributed to the recent uptick in optimism.

Nevertheless, the report highlights that while confidence has improved, it remains below historical averages, and the region continues to grapple with structural challenges such as slow productivity growth and high public debt levels.

One of the more surprising findings of the Q1 report is the return of inflationary pressures in North America and Western Europe. The Cost Index for both regions increased significantly, reversing the downward trend observed in late 2024. This development may pose a challenge for central banks considering interest rate cuts later in the year.

In contrast, inflationary pressures remained stable in Asia-Pacific and only rose modestly in the Middle East, Africa, and South Asia.

"Central banks in developed economies may need to reassess the timing of policy loosening," the report warned. "Persistently high costs could derail efforts to stimulate growth through lower interest rates."

One bright spot in the report is improved global access to finance. Only 13 per cent of respondents cited financing as a major concern, the lowest proportion in over three years. However, disparities remain, particularly in emerging markets. In Africa, nearly 30 per cent of respondents reported access to finance as a major issue, underscoring the uneven recovery across regions.

Sector-specific risks also varied. Cybersecurity continues to top concerns in the financial services industry, while public and not-for-profit sectors highlighted talent shortages as a critical issue. In the corporate sector, broader economic and geopolitical uncertainties remain the leading sources of concern.

Despite the drop in overall confidence, the New Orders Index showed strength across several regions, particularly in Africa, South Asia, Asia-Pacific, and the Middle East. These results suggest that economic activity remains relatively healthy in many parts of the world, even as sentiment lags.

"This divergence between soft data, like confidence, and hard data, such as new orders, will be a critical theme in 2025," the report noted. "Whether businesses begin to act on current demand or remain paralysed by uncertainty will shape the global growth trajectory."

The report concludes that global economic confidence remains fragile but not yet broken. With real activity indicators showing resilience, there is still potential for recovery, provided inflation is kept in check and policymakers maintain clarity and consistency.

"If confidence can stabilise, and inflation remains under control, there is a pathway towards recovery," the report stated. "However, persistent volatility in sentiment may ultimately drag down investment, hiring, and longer-term growth potential."