Confidence among business leaders in global economic growth has dropped to its lowest level in over a decade amid inflation, macroeconomic volatility and geopolitical conflict, a new survey by PricewaterhouseCoopers has shown.
According to PwC’s Annual Global CEO Survey, 73% of CEOs around the world believe global economic growth will decline over the next 12 months. It is the most pessimistic sentiment regarding growth since PwC began asking the question 12 years ago and a significant departure from the optimistic outlook of 2022 when 77% thought economic growth would improve.
While cyber and health risks dominated the landscape a year ago, the economic downturn has become the leading concern among businesses, with inflation (40%), macroeconomic volatility (31%) and geopolitical risk (25%) weighing most heavily upon CEOs in the short-term.
PwC said 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 (48%) of CEOs exposed to geopolitical conflict increasing investment in cybersecurity or data privacy, while 46% have adjusted supply chains and 46% have re-evaluated market presence or expanding into new markets.
Furthermore, nearly 40% of CEOs do not believe their organisations will be economically viable in 10 years if they do not transform. The pattern is consistent across a range of sectors, including telecommunications (46%), manufacturing (43%), healthcare (42%) and technology (41%).
CEO’s confidence in their own company’s growth prospects has also dropped to the lowest level since the 2008-2009 financial crisis, PwC said. More than half (52%) of CEOs reported reducing operating costs, while 51% have raised prices and 48% are diversifying product and service offerings.
The findings of the report showed that G7 economies, including France, Germany and the UK, saw the biggest decline in business confidence, driven in part by the ongoing energy crisis.
CEOs are also experiencing direct challenges to profitability within their own industries over the next 10 years, with more than half (56%) expecting customer demand/preferences to impact profitability, as well as changes in regulation (53%), skills shortages (52%) and technology disruptions (49%).
Bob Moritz, global chairman at PwC, 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 heavily as a short-term risk over the next 12 months, CEOs still see climate risk as impacting their cost profiles, supply chains and physical assets from a moderate to very large extent, with those in China feeling particularly impacted.
Despite an increasing number of countries now having some form of carbon pricing, a majority of respondents (54%) still do not plan to apply an internal price on carbon in decision-making and over a third (36%) do not plan to implement initiatives to protect their company’s physical assets and/or workforce from the impact of climate risk.
The report also shone a spotlight on the need for CEOs to collaborate with non-business entities to address sustainable development, diversity, equity and inclusion and education.
Moritz added: “The risks facing organisations and society today cannot be addressed alone and in isolation. CEOs must therefore continue to collaborate with a wide range of public and private sector stakeholders to effectively mitigate those risks, build trust and generate long term value – for their businesses, society and the planet.”
