As Davos begins, CEOs and economists prepare for a recession
The World Economic Forum’s annual meeting began in Davos, Switzerland, with corporate executives and economists predicting a global recession this year.
PricewaterhouseCoopers LLP polled 4,410 business leaders in October and November of last year, and 73% predicted a decline in global growth over the next 12 months. The result was the lowest since the polling firm began in 2011. Two out of every five respondents expressed concern that their businesses would fail within a decade.
A separate Forum survey of chief economists found that two-thirds expect a global recession in 2023 as businesses cut costs; 18% see such a downturn as “extremely likely.”
Concerns are likely to be widespread this week, as over 2,700 executives, bankers, and economists gather in Davos, Switzerland, for the first time in January since 2020. While recent data has raised hopes that economies can still avoid a hard landing, last year’s surge in inflation and subsequent interest rate hikes by central banks have many expecting economies to contract.
Nonetheless, PWC global chairman Bob Moritz stated that the level of concern expressed in his firm’s poll was likely exaggerated.
Nonetheless, business leaders’ confidence in their own company’s growth prospects has dropped to its lowest level since the 2008 financial crisis.
Adapt or perish
According to the survey, the top three risks this year are inflation, macroeconomic volatility, and geopolitical conflict.
According to PWC’s Moritz, the biggest surprise has been the long-term outlook, with 40% of CEOs believing “their organisations will not be economically viable in 10 years if they do not transform.”
“The longer term is about supply chains, climate change, and technology disruption,” he said, referring to how to manage cost constraints in the medium term. Bosses must act now to “survive two years to prosper in the following ten” while making sure they have the resources available for future investments.
CEOs were concerned about cyber, health, and climate issues last year. The climate catastrophe, according to Moritz, is still a pressing one. “I don’t care that it has fallen down the lists. Things are relative; 60% to 70% of CEOs have already taken some sort of action “explained he.
Geopolitical dangers are not limited to China and Russia. “What else can happen if Russia-Ukraine does?” Moritz enquired. “What about Iran’s involvement in the Middle East? Even the US’s Inflation Reduction Act poses a threat.” Geopolitical conflicts in Europe are being brought on by the hundreds of billions of dollars in clean energy project subsidies provided by the IRA.
In terms of staffing, 60% of managers do not intend to reduce headcount, and 80% do not intend to lower compensation since they would rather keep their current workers than undergo time-consuming hiring procedures. This year, there will likely be a significant rate of staff turnover.
Workers with the necessary abilities continue to hold the power, according to Moritz.
Even less confident about local growth than they are about global expansion are business leaders in France, Germany, and the UK.
Although chief executives identify the UK as the third most important place for revenue development, behind the US and China and tied with Germany, the UK has improved as a preferred site for businesses. It has never before come in higher than fourth.