Bangkok--20 Jan--Grant Thornton
Confidence levels over economic performance are higher in Latin America than any other part of the world as the region leads the way on business optimism into the New Year, according to the 2011 Grant Thornton International Business Report (IBR). 2011 is the first year Latin America has led the world on optimism.
Across Latin America, a balance of +75% of privately held business owners are optimistic about their region’s economic performance in 2011. Elsewhere, optimism in the Asia Pacific region (excluding Japan) is at +50%, whilst in North America it is just +26%, with Europe the least optimistic region at +22%.
Within Latin America, Chile (+95%) scored the highest optimism of any country surveyed followed by Brazil (+79%), Argentina (+70%) and Mexico (+64%).
Ed Nusbaum, CEO of Grant Thornton International, said, "In recent years the focus for emerging economies has been on the BRIC economies of Brazil, Russia, India and China. However, Latin America has come a long way. The region as a whole is expected to see GDP growth of around 4% in 2011 and if the current business confidence translates to widespread, sustained growth, the next decade could see Latin America truly realise its potential. If the economic story of the last decade was about the BRICs, these results suggest the next decade will be about Latin America."
"The success and growth of Brazil has a big impact on its neighbours. The country’s sustained economic growth, which is forecast by the IMF to be 7.5% for 2010, is buoying the region and spreading optimism to neighbours in Chile, Argentina and Mexico. It is also impossible to ignore the knock-on effects right across the region since Brazil won the right to host the 2014 World Cup and the 2016 Olympics. These events will provide a real economic boost for all of Latin America and that has undoubtedly translated into a sense of confidence and optimism."
Optimism swings and a polarised Eurozone
The 2011 IBR reveals some big swings in optimism levels in key economies. Businesses in Germany are the most optimistic in the Eurozone at +75% — an optimism which has surged over the past year (2010: +38%). In addition Finland (+57%), Belgium (+45%) and the Netherlands (+19%) are all experiencing high levels of business confidence going into 2011. However, going into 2011 confidence is understandably low throughout those Eurozone economies experiencing sovereign debt troubles with Ireland (-45%), Spain
(-50%) and Greece (-44%) at the bottom of the global league table.
This year’s report tells a concerning tale of two Europes. Diverging levels of business confidence across the region will put increasing strain on a Eurozone that has had a turbulent 2010. Maintaining a monetary union across nation states that are pulling in opposite directions will be increasingly difficult. The Eurozone seems likely to go through several years of tension and a period of persistent volatility in financial markets. 2011 could be a year when crucial decisions need to be taken about the euro.
Asia Pacific, last year’s leading region for business optimism, has seen a significant fall from +64% to +50% as economies such as mainland China (down from +60% in 2010 to +42%), Australia (down from +79% in 2010 to +37%) and New Zealand (down from +66% to +35%) showed large negative swings in optimism.
In Thailand, business executives were also asked whether they were optimistic with regard to the economy over the next 12 months would be. Following a strong recovery in 2010, this year (2011) IBR survey results reflect that the level of optimism continues to increase from 12% last year to 39% this year.
Ian Pascoe, Managing Partner of Grant Thornton Thailand, comments, “We hope this continued optimism can be turned into reality in the Kingdom’s complex political environment. Given a general election is to be called in 2011, economic confidence should remain strong provided that there is not a resurgence in political unrest.”
Businesses around the world expect weak investment in 2011
The IBR reveals that business owners expect to see only moderate levels of investment in 2011. 35% more businesses expect to see increases in investment in plant and machinery and only 24% more expect to see an increase in research and development (R&D). A notable exception to this trend is mainland China where +47% of businesses expect to increase investment in plant and machinery, and +61% expect to increase their R&D.
Ian Pascoe, said, "Sooner or later businesses will need to invest if they want to continue to grow.
Governments in these economies need to create environments that encourage business investment. But with interest rates already at historic lows in many mature economies the option to reduce them further and stimulate investment is not available. Therefore they will need to be creative. Some of this creativity might be directed towards the banks where lending activity to businesses in a number of economies has been low as they seek to rebuild their balance sheets in the wake of the financial crisis."
In contrast to many other countries, Thai business respondents remain more positive than last year on all business trends, with a balance of +59% optimism for revenue increases, +49% optimism for plant and machinery investment and +47% optimism for profit increases.
Ian Pascoe comments, “The strength of the Thai Baht will make Thai exports more expensive although the majority of the regional economies are experiencing a similar issue. In order to remain competitive, Thai businesses need to continue to invest to ensure they remain efficient. We would therefore encourage the policy maker to assist in developing a framework which would allow an easier flow of loan facilities, including working capital, from the banking system to businesses.
Employment expectations
When asked about employment expectations in 2011, European businesses were less optimistic than their counterparts elsewhere in the world; a positive balance of 16% in Europe compared to balances of +35% and +56% in Asia Pacific and Latin America respectively. At +42% positive, Thailand stands ahead of the world average (+29%) for employment expectations but somewhat behind the ASEAN average of +45%.
Notes to editors
The Grant Thornton International Business Report (IBR) provides insight into the views and expectations of over 11,000 businesses per year across 39 economies. This unique survey draws upon 19 years of trend data for most European participants and nine years for many non-European economies.
Data collectionThe 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. Q4-2010 fieldwork took place in November/December 2010. (in which the results are reported in this news release)
SampleMETHODOLOGY
IBR is a survey of medium to large privately held businesses, researching the opinions of over 5,700 businesses in Q42010, and over 11,000 on an annual basis. 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.
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