Nearly three-quarters (73%) of CEOs believe global economic growth will decline over the next 12 months, according to PwC’s 26th Annual Global CEO Survey, which polled 4, 410 CEOs in 105 countries and territories in October and November 2022.
The bleak CEO outlook is the most pessimistic that CEOs have been regarding global economic growth since 12 years ago and is a significant departure from the optimistic outlooks of 2021 and 2022 when more than two-thirds (76% and 77%, respectively) thought economic growth would improve, ITOnline reports.
According to the report, in sub-Saharan Africa, CEO survey respondents expressed many similar sentiments to their counterparts globally.
Additionally, local and regional factors impact their businesses and their outlook for the future, such as load-shedding in certain southern African countries, currency depreciations and inflation, and specific skills requirements and growth opportunities.
In addition to a challenging environment, nearly 40% of CEOs think their organisations will not be economically viable in a decade if they continue on their current path.
The pattern is consistent across a range of sectors, including telecommunications (46%), manufacturing (43%), healthcare (42%) and technology (41%).
CEO confidence in their own company’s growth prospects also declined dramatically since last year (-26%), the biggest drop since the 2008-2009 financial crisis when a 58% decline was recorded.
Globally, business confidence around economic growth varies starkly, with G7 economies, including France (70% versus 63%), Germany (94% versus 82%) and the UK (84% versus 71%) – all weighed down by an ongoing energy crisis – being more pessimistic about their domestic growth prospects than they are about global growth.
CEOs are also seeing multiple direct challenges to profitability within their own industries over the next ten years.
More than half (56%) believe changing customer demand/preferences will impact profitability, followed by changes in regulation (53%), labour/skills shortages (52%), and technology disruptions (49%).
While cyber and health risks were the top concerns a year ago, the impact of the economic downturn is top of mind for CEOs this year, with inflation (40%) and macroeconomic volatility (31%) leading the risks weighing on CEOs in the short term – the next 12 months – and over the next five years.
Close behind, 25% of CEOs also feel financially exposed to geopolitical conflict risks, whereas cyber risks (20%) and climate change (14%) have fallen in relative terms.
The war in Ukraine and growing concern about geopolitical flashpoints in other parts of the world have caused CEOs to rethink aspects of their business models, with almost half of the respondents that are exposed to geopolitical conflict integrating a wider range of disruptions into scenario planning and corporate operating models either by increasing investments in cybersecurity or data privacy (48%), adjusting supply chains (46%), re-evaluating market presence or expanding into new markets (46%), or diversifying their product/service offering (41%).
In response to the current economic climate, CEOs are looking to cut costs and spur revenue growth. Fifty-two percent of CEOs report reducing operating costs, while 51% report raising prices and 48% diversifying product and service offerings.
However, more than half (60%) say they do not plan to reduce the size of their workforce in the next 12 months. A vast majority (80%) indicate they do not plan to reduce staff remuneration in order to retain talent and mitigate workforce attrition rates.
Bob Moritz, PwC global chairman said, “A volatile economy, decades-high inflation, and geopolitical conflict have contributed to a level of CEO pessimism not seen in over a decade. CEOs globally are consequently re-evaluating their operating models and cutting costs, yet despite these pressures, they are continuing to put their people front and centre as they look to retain talent in the wake of the ‘Great Resignation’.
“The world continues to change at a relentless pace, and the risks facing organisations, people – and the planet – will only continue to rise. If organisations are not only to thrive but survive the next few years, they must carefully balance the dual imperative of mitigating short-term risks and operational demands with long-term outcomes – as businesses that don’t transform, won’t be viable.”
While climate risk did not feature as prominently as a short-term risk over the next 12 months relative to other global risks, CEOs still see climate risk impacting their cost profiles (50%), supply chains (42%) and physical assets (24%) from a moderate to a very large extent.
Recognising the impact climate change will have on business and society over the long term, a majority of CEOs have already implemented – or are in the process of implementing – initiatives to reduce their companies’ emissions (65%), in addition to innovating new, climate-friendly products and processes (61%), or developing a data-driven, enterprise-level strategy for reducing emissions and mitigating climate risks (58%).
Despite an increasing number of countries now having some form of carbon pricing, most respondents (54%) still do not plan to apply an internal price on carbon in decision-making, and over a third (36%) don’t plan to implement initiatives to protect their company’s physical assets and/or workforce from the impact of climate risk.
CEOs noted the need to collaborate with a wide range of stakeholders to build trust and deliver sustained outcomes if they are to generate long-term societal value. The survey found that when organisations partner with non-business entities, it is to address sustainable development (54%), diversity, equity, and inclusion (49%), and education (49%).
If organisations are to remain viable in the near and long term, they must also invest in their people and technological transformation agendas to empower their workforces.
Technologically, 76% of organisations say they are investing in automating processes and systems, implementing systems to upskill workforces in priority areas (72%), and deploying technology such as the cloud, AI and other advanced technology (69%).
