The World Economic Forum in Davos began Tuesday, but according to a new survey, many of the CEOs who will fill the conference’s seats are not optimistic about the health of the global economy.
Of the nearly 1,400 survey chief executives only 27 percent thought the global economy’s growth would continue, according to a report done by consultants with PwC.
Emily Young of BBC News had the day’s news:
Global chief executives are more pessimistic about growth than this time last year, according to a survey.
Only 27% of interviewees thought growth would improve, against 37% in 2015, the report by consultants PwC showed.
Business leaders are increasingly worried about geopolitical risks, as well as China’s economic slowdown and the falling oil price.
The findings chime with a report by International Monetary Fund report that downgraded global growth forecasts.
The IMF said on Tuesday that it now predicts economic activity to expand by 3.4% this year, down from an estimate of 3.6% in October.
PwC’s survey, released ahead of the annual World Economic Forum, held at Davos, in the Swiss Alps, interviewed more than 1,400 chief executives across 83 countries.
“There’s no question that business leaders’ confidence in both the global economy and their own company growth prospects has taken a knock,” said Dennis Nally, global chairman of PwC.
“No matter what the business size, the threats it faces are becoming more complex, crossing the borders of geopolitical, regulation, cyber security, societal developments, people and reputation.”
Peter Goodman of the International Business Times detailed the reasons CEOs are pessimist over the global economy:
The PwC survey underscored a sense of foreboding at work as world leaders and investors gathered in this ski resort in the Alps for the annual exercise known as the World Economic Forum, five days of dealmaking, diplomacy and networking served up amid high-minded talk of “improving the state of the world” — much of it underwritten by global banks and consulting firms.
The grim view speaks in large part to deepening concerns over geopolitical risks, from the looming threat of terrorist attacks in world capitals to continued clashes between Russian and Ukrainian forces, as well as territorial disputes in the waters south and east of China. Some 74 percent of CEOs worldwide listed geopolitical risks as a major concern, second only to “overregulation,” a perennial lament.
Executives continue to fret over the slowdown in China, the world’s second-largest economy. Fears that China’s appetite for the wares of the world will continue to diminish have sown fears around the planet, not least in major producers of raw materials. Brazil’s crippling recession has been amplified by the loss of Chinese orders for its prodigious soybeans. Australian and Canadian mining operations have fallen on hard times as Chinese steel producers stare at oversupply, limiting orders for iron ore and other minerals.
Ben Hirschler of Reuters explained how even foreign CEOs are as pessimistic as their American counterparts:
There is little to cheer CEOs elsewhere in the world.
“Europe and North America are doing okay but if you look at many emerging markets, there are real concerns,” Alex Molinaroli, chief executive of industrial group Johnson Controls, told Reuters.
Molinaroli, whose company has major operations in China, does not think the country’s economic fundamentals are as bad as the recent slump in the local stock market might suggest, but he worries about the ripples spreading from China.
“We’re seeing the impact on commodities, especially oil, and that is going to have major ramifications. The energy sector is what has got everybody as nervous as anything else,” he said.
Only 35 percent of CEOs in the PwC survey said they were “very confident” of growing their company’s revenue in the next 12 months, down from 39 percent in 2015 and the lowest reading since 2010.
Confidence among U.S. bosses fell to 33 percent from 46 percent in 2015, echoing similar declines in other Western countries including Germany and Britain.
India was a rare bright spot among major economies in bucking the downbeat mood, with confidence in short-term sales growth rising to 64 percent from 62 percent.
Swiss CEOs, meanwhile, took the prize as the most pessimistic in the world, with a confidence reading of just 16 percent, down from 24 percent a year ago, after the “frankenshock” of January 2015, which saw the franc surge.
The PwC survey was conducted in the fourth quarter of 2015 in 83 countries.
“You can imagine that if we had done it in the first weeks of January then the picture would have been even gloomier,” Nally said.
