CEO confidence in growth dips dramatically

What a difference a year makes. Nearly 30% of business leaders believe that global economic growth will decline in the next 12 months, approximately six times the level of 5% last year – a record jump in pessimism. This is one of the key findings of PwC’s 22nd annual survey of 1,300 plus CEOs around the world, launched today at the World Economic Forum Annual Meeting in Davos. This is in vivid contrast to last year’s record jump, 29% to 57%, in optimism about global economic growth prospects.

Although, all is not doom and gloom: 42% still see an improved economic outlook, though this is down significantly from a high of 57% in 2018. Overall, CEOs’ views on global economic growth are more polarised this year but trending downward. The most pronounced shift was among CEOs in North America, where optimism dropped from 63% in 2018 to 37% likely due to fading of fiscal stimulus and emerging trade tensions. 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. “With the rise of trade tension and protectionism it stands to reason that confidence is waning.”

Confidence in short-term revenue growth has fallen sharply

The unease about global economic growth is lowering CEOs’ confidence about their own companies’ outlook in the short term. Thirty-five percent of CEOs said they are ‘very confident’ in their own organisation’s growth prospects over the next 12 months, down from 42% last year.

Taking a closer look at some country-specific results, CEOs’ confidence reflected the global drop:

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, slowing economy and risk of disorderly Brexit
In Argentina, dropping from 57% to 19% – due to recession and currency collapse
In Russia, dropping from 25% to 15% – due to decline in export demand, currency volatility and higher unemployment

To drive revenue this year, CEOs plan to rely primarily on operational efficiencies at 77% and organic growth at 71%.

Top markets for growth: Confidence in US continues despite significant dip

The US retains its lead 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%; 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,” stated Moritz.