Inside the Minds of CEOs: A Global View

The results of PwC’s 22nd annual survey of 1,300-plus CEOs, which were launched this week at the World Economic Forum Annual Meeting in Davos, Switzerland, shows that nearly 30% believe that global economic growth will decline in the next 12 months, six times the level of last year—a record jump in pessimism. What else is on the minds of CEOs?

Confidence in global economic growth declines

The PwC study showed a reversal in thinking as it related to CEO’s outlook for global economic performance: in last year’s study only 5% of CEOs thought global economic performance would decline over the next 12 months. Similarly, the level of CEOs with a positive outlook for global economic performance declined year over year. Forty-two (42%) of CEOs still see an improved economic outlook although this is down from the a high of 57% in 2019. Overall, CEOs’ views on global economic growth are more polarized this year but trending downward. The most pronounced shift was among CEOs in North America, where optimism dropped from 63% in 2018 to 37% this year likely due to fading of fiscal stimulus and emerging trade tensions, according to the PwC study. The Middle East also saw a big drop from 52% to 28% due to increased regional economic uncertainty.

The drop in CEO optimism has also impacted growth plans beyond their own country borders. The US narrowly retains its position as the top market for growth at 27%, down significantly from 46% in 2018. The second most attractive market, China, also saw its popularity fall to 24%, down from 33% in 2018. Overall, India is the rising star on the list this year, recently surpassing China as the fastest growing large economy.

“CEOs’ views of the global economy mirror the major economic outlooks, which are adjusting their forecasts downward in 2019,” said Bob Moritz, Global Chairman, PwC, in commenting on the study. “With the rise of trade tension and protectionism it stands to reason that confidence is waning.”

Economic unease lowers short-term revenue expectations

The unease about global economic growth is lowering CEOs’ confidence about their own companies’ outlook in the short term, according to the PwC study. Thirty-five percent (35%) of CEOs said they are “very confident” in their own organization’s growth prospects over the next 12 months, down from 42% last year (2018). To drive revenue this year, the study showed that CEOs plan to rely primarily on operational efficiencies (77% of CEOs cited) and organic growth (71%).

Looking at some country-specific results, CEOs’ confidence reflected the overall drop in confidence for global economic performance, as outlined below:

  • In China, dropping from 40% in 2018 to 35% this year due to trade tensions, US tariffs, and weakened industrial production;
  • In the US, dropping from 52% to 39% due to trade tensions and slowing economy;
  • In Germany, dropping from 33% to 20% due to trade tensions, a slowing economy, and risk of a disorderly Brexit;
  • In Argentina, dropping from 57% to 19% due to recession and currency collapse and;
  • In Russia, dropping from 25% to 15% due to decline in export demand, currency volatility and higher unemployment.

Confidence in US continues despite significant dip

Among CEOs, the PwC study showed that US is still regarded as the top market for growth over the next 12 months; however, many CEOs are also turning to other markets, reflected in the dramatic drop in the share of votes in favor of the US from 46% in 2018 to just 27% in 2019. China narrowed the gap, but also saw its popularity fall from 33% in 2018 to 24% in 2019. As a result of the ongoing trade conflict with the US, China’s CEOs have diversified their markets for growth, with only 17% selecting the US, down from 59% in 2018.

The other three countries rounding out the top five for growth include Germany at 13%, down from 20% in 2018; India at 8%, down from 9%; and the UK at 8%, down from 15%.

“The turn away from the US market and shift in Chinese investment to other countries are reactions to the uncertainty surrounding the ongoing trade dispute between the US and China,” said PwC’s Moritz.

Threats to growth, including impact on supply chain and sourcing strategies

The PwC study also gained input on what they perceived as the greatest threats to economic growth. “As indicators predict an imminent global economic slowdown, CEOs have turned their focus to navigating the surge in populism in the markets where they operate,” according to a PwC press release in summarizing the study results. “Trade conflicts, policy uncertainty, and protectionism have replaced terrorism, climate change, and increasing tax burden in the top ten list of threats to growth.

Looking more specifically, of the CEOs saying that they were “extremely concerned” about trade conflicts, 88% are specifically uneasy about the trade issues between China and the US. Ninety-eight percent (98%) of US CEOs and 90% of China’s CEOs have cited such concerns. Of China’s CEOs who are “extremely concerned” about trade conflicts, a majority (62%) say that they are adjusting their supply chain and sourcing strategy. Fifty-eight percent (58%) are adjusting their growth strategy to different countries.

Data and analytics

This year’s PwC survey also examined CEOs’ positions into data and analytics and artificial intelligence to gain their insights on the challenges and opportunities.

This year’s survey revisited questions about data adequacy first asked in 2009. It was found that CEOs continue to face issues with their own data capabilities despite investments made in information technology infrastructure over the past 10 years. CEOs still report not receiving comprehensive data needed to make key decisions about the long-term success and durability of their business.

When it comes to closing the skills gap in their organization, 46% of CEOs see significant retraining and upskilling as the answer, with 17% also citing establishing a strong pipeline directly from education as an option.

“As technological changes continue to disrupt the business world, people with strong data and digital skills are in even higher demand and increasingly harder to find,” said PwC’s Moritz. “That said, the need for people with soft skills is also critical, which is why business, government and educational institutions need to work together to address the demands of the evolving workforce.”

With respect to AI, 85% of CEOs agree that AI will dramatically change their business over the next five years. Nearly two-thirds view it as something that will have a larger impact than the Internet.

In terms of having actual plans for AI use or implementation in their businesses, 23% of CEOs currently have no current plans to pursue AI, with a further 35% planning to do so in the next three years. Thirty-three percent (33%) have taken what the survey termed “a very limited approach.” Fewer than 1 in 10 CEOs have implemented AI on a wide scale.

When it comes to the impact AI will have on jobs, 88% of China’s CEOs believe AI will displace more jobs than it creates. Other Asia-Pacific CEOs are also pessimistic at 60%, compared to 49% globally. CEOs in Western Europe and North America are less doubtful, with 38% and 41% believing AI will displace more jobs than it creates.

“Although organisations in Asia-Pacific, North America, and Western Europe have reported comparable levels of AI adoption, we see a growing divide over their belief about the potential impacts of AI on society and the role government should play in its development,” said PwC’s Moritz.

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