At the beginning of the new decade, business leaders around the world are showing record levels of pessimism. According to a new survey, 53% of CEOs expect a decline in economic growth in 2020. Last year, 29% of the expectations were gloomy, and only 5% in 2018. This is the highest level of pessimism compared to all results from 2012, notes the 23rd Annual PwC CEO Business Survey, conducted among 1581 CEOs in 83 countries in the world.
CEOs in North America (63%), Western Europe (59%) and the Middle East (57%) are most pessimistic. Only 22% of business leaders expect an increase in economic growth compared to 42% in 2019, according to PricewaterhouseCoopers (PwC). From there, they state that the conclusions were drawn after the interviews were conducted between September and October 2019.
“The downturn in economic growth is not surprising given the current uncertainty surrounding trade conflicts, geopolitical issues and the lack of a clear approach to climate change. These challenges are not new, but they are evolving at a rapid pace, so the key question is how to deal with them together”, said Bob Moritz, Chairman of PwC’s Global Network.
Expectations for profit growth are declining
CEOs are unsure of their own companies’ performance over the next 12 months. Only 27% of survey respondents say they are “very confident” about the growth of their companies – the lowest result since 2009 and a decline of 8% since 2019.
Of the leading economies, China and India show the highest levels of confidence in future economic growth, at 45% and 40% respectively. It is followed by the USA (36%), Canada (27%), Germany (20%) and France (20%), while Japan has the lowest level of optimism among business leaders – 11%.
Global growth under pressure
It turns out that CEOs’ responses to the expected growth of the companies they run are a great predictor of global economic growth. Analyzing the forecasts of business leaders since 2008, the relationship between confidence in 12-month revenue growth and the real growth of the global economy is very strong. Assuming this analysis is valid now, global growth could decline to 2.4% in 2020, which is much lower than other projections, including that of the International Monetary Fund – 3.4%.
China is approaching the US
The US remains the most preferred market for the next 12 months, indicated by 30% of survey participants. China is next with 29%. The other countries in the Top 5 for growth are the same as last year – Germany (13%), India (9%) and the United Kingdom (9% – a high score, given the ambiguities surrounding Brexit).
More regulation in cyberspace
Over 2/3 of CEOs predict that governments will introduce new legislation to regulate content on the Internet and social networks and to influence dominant technology companies. Most executives (51%) also predict that governments will increasingly oblige the private sector to financially compensate individuals for the personal data it collects.
The Challenge with Qualification
Lack of key skills remains a major threat to growth, according to CEOs. Although business leaders believe that retraining/upgrading is the best way to bridge skills gaps, they do not make significant progress in this direction. Only 18% of CEOs say they have made “significant progress” in setting up a training program. This is also a feeling in the workforce. In a separate PwC survey, 77% of 22,000 workers worldwide say they would like to acquire new skills or retrain, but only 33% believe they have been given the opportunity to develop digital skills beyond everyday duties.
Climate investment
While climate change is not at the forefront of the list of potential threats to growth, CEOs are increasingly assessing the benefits of carbon footprint actions at their companies. Compared to a decade ago, they are now twice as likely to “agree” that investing in climate change initiatives will have a positive impact on companies’ reputation (30% in 2020 compared to 16% in 2010). Now 25% of business leaders (up from 13% in 2010) believe that such initiatives can lead to new opportunities for products and services.