20
CONCERNS ABOUT THE ECONOMY INTENSIFY
oVERALL the macroeconomic environment continues to weaken, however there is light at the end of the tunnel. The principal culprit for this slowdown is the continuing crisis in the Eurozone, which is dragging down economic growth everywhere, including rapid-growth economies, such as China, India and Brazil.
With large amounts of sovereign debt maturing in 2012, and with the recent downgrades of France and Austria undermining fragile confidence in financial markets, policy-makers in the region will remain under intense pressure.
The prospect that the Eurozone will fall into recession in 2013 looks increasingly likely. Growing concern in the banking sector about exposure to sovereign debt is also causing a tightening of lending conditions, which could worsen dramatically if the situation in the Eurozone deteriorates further.
2012 was also a year of major political change, which, prematurely, added to the sense of uncertainty. The US and France both faced elections and China sees the handover of the presidency and prime- minister ship to a new guard in 2013. Government actions and policy responses Since the financial crisis, government has played an increasingly active role in business. In many developed countries, governments have stepped in to take over ailing financial services institutions and protect them from bankruptcy. Regulation has become more intrusive, and some governments have become more active in setting and determining industrial policy. Among a recent survey’ s respondents, 61 % say that the risk of a continuing expansion of government’ s role has increased as a result of recent economic turbulence. Government influence on business has also increased in some rapid-growth markets.
In China, for example, state-owned enterprises( SOEs) have grown significantly in stature and now number among some of the world’ s largest companies. The Chinese Government is routinely accused of granting preferential treatment to these SOEs, including cheap loans and regulation that favors them over private companies.
With public finances under severe strain, many countries are taking a much tougher line on tax enforcement. Tax authorities are undertaking more frequent and aggressive audits, particularly of crossborder transactions, and are sharing tax information with administrations in other countries. In a recent survey, some 67 % of companies worldwide reported that they are experiencing heightened risk or uncertainty around tax legislation.