Chief executives around the world are showing record levels of pessimism about the global economy, with more than half (53%) predicting lower economic growth in 2020.
Last year, only 29% of nearly 1,600 chief executives surveyed by PwC for its Annual Global CEO Survey believed GDP rates would drop and in 2018 that figure was just 5%.
Bob Moritz, chairman of the PwC network, said given the lingering uncertainty over trade tensions, geopolitical issues and the lack of agreement on how to deal with climate change, the drop in confidence in economic growth is not surprising – even if the scale of the change in mood is.
CEO pessimism over global economic growth is particularly pronounced in North America, Western Europe and the Middle East.
As far as expectations for their own businesses are concerned, Chinese and Indian executives are showing the highest levels of confidence among major economies, with 45% and 40%, respectively, believing their companies will grow revenues this year.
This number is lower in the US at 36%; Canada, 27% ; the UK, 26%; Germany, 20%; and France, 18%; while Japan has the least optimistic CEOs with only 11% of executives saying they are very confident their businesses will see increasing revenues in 2020.
PwC said in the past, CEO sentiment about their companies’ growth prospects and actual economic growth have been closely aligned. Should the correlation continue, global growth could slow to 2.4% in 2020. This is well below consensus estimates, including the 3.4% growth prediction by the International Monetary Fund released in October 2019.
Graeme Sunley, PwC Cayman leader, said the key themes of this year’s Annual Global CEO Survey, such as concerns over growth along with a focus on regulation, cyber threats and digital skills shortages, were not new but the magnitude of uncertainty had markedly increased.
“CEOs appear increasingly worried about the accelerating pace of change and the sustainability of growth as well as the impact we are having on the planet,” he said.
In 2019, uncertain economic growth ranked outside the top 10 concerns for CEOs at number 12. This year it has leapt to third place, just behind trade conflicts – another risk that has risen up the CEOs’ agenda – and the perennial over-regulation, which has again topped the table as the number one threat for CEOs.
Sunley said because it is becoming increasingly complex to do business internationally, “we must strive to ensure that Cayman’s regulatory regime can meet the high standards set by the international community while also allowing businesses to operate within risk-based and pragmatic frameworks – principles which Cayman’s financial services industry is based on”.
Although climate change does not appear among the top 10 threats to CEOs’ growth prospects, the chief executives are expressing a growing appreciation of the upside of taking action to reduce their carbon footprint, PwC’s analysis found, as more businesses are considering the vulnerability of their operations and the potential for new products and services.
At the same time, public expectations for businesses to engage with the climate issue are rising.
PwC itself is offsetting its energy use and air travel emissions and has joined RE100, a global coalition of businesses committed to transitioning to 100% renewable usage. The consulting firm said it aims to source 70% of its electricity needs from renewable sources by 2022.
Another issue identified by the report is the greater need for digital upskilling.
According to the survey, the shortage of key skills remains a top threat to growth for CEOs and they agree that retraining and upskilling is the best way to close the skills gap. But only 18% of CEOs say they have made “significant progress” in establishing an upskilling programme.
Workers agree on the need to improve their skill sets. A separate PwC survey found that 77% of 22,000 workers around the world would like to learn new skills or retrain, but only 33% feel they have been given the opportunity to develop digital skills outside their normal duties.
Sunley said that his firm had made a significant commitment to helping prepare its staff for the digital world. “Globally, PwC is committing US$3 billion over the next four years to upskill our people and invest in technologies for supporting clients and communities. Locally, many of our people began their digital upskilling journey over the last year, learning how to think, act and thrive in an ever-changing digital environment,” he said.