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Terrorism Pessimism

by msecadm4921

The threat of terrorism makes almost a third of businesses feel more pessimistic about economic prospects, according to the Grant Thornton International Business Owners Survey (IBOS).

The first results from the 2005 IBOS survey, conducted in 24 countries around the world, show that business owners of mid-sized companies worldwide are much more optimistic about the economy than a year ago. Companies in 13 out of the 24 economies surveyed are much more optimistic than last year, with an increase of more than 10% in their optimism/pessimism balance. Only three countries significantly buck this trend; the US, Russia and Spain – with more than a 10% drop in their optimism/pessimism balance. Expectations for investment (in new buildings and plant and machinery), a critical indicator of medium-term strength, are at the highest level in the history of the global survey and at the highest level in the EU since 2001. 
Despite the overall optimistic results, however, the impact of terrorism had affected business owners’ views. Nearly a third (29%) of business owners in the whole survey said that terrorism had made them more pessimistic about their economy. This was most notable in Mexico (53%), Spain (49%), Taiwan (42%), Poland (37%), Turkey (36%), Italy (35%), Japan (35%), Germany (34%), the Netherlands (31%), the US (31%) and Russia (29%).

What they say

Said Andrew Godfrey, Head of International & European Services at Grant Thornton International "Terrorism has obviously had a strong impact on business opinion all over the world. But despite that, the business world is a much more optimistic place than a year ago. The US, the world’s largest economy, may have passed the peak in its current economic cycle however, and optimism there, although high, has dropped from +78% to +62%.  It seems to be a case of the US becoming less buoyant just as the rest of the world becomes more positive. The results are particularly welcome at a time when overall economic performance appears to have stalled. All round the world, consumer-led spending has kept economies afloat for the last few years. As that has faded, business confidence looks as though it is taking over, boosting investment which is important for the medium-term outlook."
The most optimistic business owners of all, for the second year, are in India with an optimism/pessimism balance of +88%. Raw material-producing economies such as Australia, Canada and South Africa also remain very optimistic. The greatest surge of optimism compared with last year is in Ireland (up by 72 points to +79%), Poland (up by 53 points to +21%) and two post-SARS Asian economies, Singapore (up by 92 points to +62%) and the Philippines (up by 51 points to +50%).
Vishesh Chandiok, International Practice Partner, Grant Thornton, India says: "The pace of fiscal, economic and industrial reforms has not only continued under the new government but appears to have gathered speed. India Inc is emerging bigger, faster and stronger. With an economist at the helm of the Government, far-reaching economic reforms and the enterprise of Indian entrepreneurs, I believe India will continue to shine for some time to come."

Business owners in Japan (-27%) are the most pessimistic about their country57;s economy although they are much less pessimistic than last year (-46%) when they were also at the foot of the league table. Japan is now the only country with a negative balance in the survey. After Japan, the least optimistic countries are Italy (+7%), Spain (+9%), Taiwan (+14%) and Russia (+14%).  The Grant Thornton International Business Owners Survey (IBOS) was carried out among over 6,300 owners of medium sized businesses from 24 countries during Autumn 2004.

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