Based on the findings from the survey, which assessed the views of 1,156 experts in 124 countries across the globe, the World Economic Climate Indicator fell for the second consecutive quarter, dropping from 85.1 to 82.4 in Q4. Although the dip is less pronounced than in the previous quarter, it nonetheless reveals that the hopes of an economic recovery seen in Q2, when the climate indicator stood at 95, have suffered a further setback.

The results of the survey, conducted by the Munich-based Ifo Institute for Economic Research and the International Chamber of Commerce, show the World Economic Climate Indicator in Q4 2012 as standing well below the long term average of 96.7 (1996 - 2011).

This latest fall in the World Economic Climate Indicator is due to WES experts' less favourable assessments of the current state of the economy and lower expectations for the six-month economic outlook.

"By late 2012, economic activity lost momentum in nearly all regions of the world," said ICC Secretary General Jean-Guy Carrier. "A clear factor in this is the ongoing debt crisis in the Euro area, which governments will have to get to grips with in order to restore investor confidence."

Europe hampered by public debt

The global economy continues to be affected by the struggling economies in the Euro area where the WES survey showed the economic climate indicator fell from 88.9 to 81.7 in Q4. With the debt crisis continuing to blight the economies of member states like Greece, Portugal and Spain, the indicator for the Euro area currently stands well below the long term average of 109.0 (1996 - 2011).

WES experts pointed to public deficits, insufficient demand and unemployment as the chief causes of the Euro area's ongoing economic difficulties. With WES experts lowering their economic expectations for the next six months they suggest there is no sign of any light at the end of the tunnel for the Euro area.

In North America, the fall in the economic climate indicator was less marked than in Europe, owing largely to more positive expectations for the U.S. economy. According to the survey, Asia's economy also continued a downward trend seen in Q3, though at a slower rate, with the economic climate indicator falling from 83.3 to 81.6.

Latin America bucks the trend

Latin America was the only major continent to go against the trend, with the economic climate indicator rising in the fourth quarter of 2012 due to WES experts' improved expectations for the economy for the next six months.

Gernot Nerb, Ifo Director of Business Surveys, said the strength of the indicator in Latin America can partly be put down to the increased competitiveness of the region's currencies.

"The positive signals from Latin America may be partly explained by the fact that some of the region's currencies are no longer overvalued and some are even undervalued, compared to the U.S. dollar, the euro, the pound and the yen," said Nerb. "This helps somewhat to increase international price competitiveness.

"On top of this, the interregional trade in Latin America appears to have picked up somewhat which may also explain part of the improvement of the business climate in this region," he added.

Source: International Chamber of Commerce