CEOs less optimistic about global economy for 2015

January 22, 2015 | 15:20

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Fewer CEOs than last year think global economic growth will improve over the next 12 months, though confidence in their ability to achieve revenue growth in their own companies remains stable, according to more than 1,300 CEOs interviewed in PwC’s 18th Annual Global CEO Survey.

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Results of the survey have been released at the opening of the World Economic Forum Annual Meeting in Davos, Switzerland.

CEOs are less optimistic about global growth prospects than a year ago, with 37 per cent of CEOs thinking global economic growth will improve in 2015. This is down from 44 per cent last year. Significantly, 17 per cent of CEOs believe global economic growth will decline, more than twice as many as a year ago (7 per cent). The remaining 44 per cent expect economic conditions to remain steady.

Regionally, the results show wide variations. CEOs in Asia Pacific are the most optimistic about the global economy with 45 per cent anticipating improvement, among which 49 per cent of ASEAN CEOs anticipate global economic growth will improve in 2015.

Following are the Middle East (44 per cent) and North America (37 per cent). On the other hand, only 16 per cent of CEOs in Central and Eastern Europe expect economic improvement. CEOs in emerging economies like India (59 per cent), China (46 per cent) and Mexico (42 per cent) are more optimistic about the economy than those in developed economies like the US (29 per cent) and Germany (33 per cent).

Despite the overall declining outlook for the global economy, CEOs remain confident about prospects for their own company; 39 per cent worldwide said they are ‘very confident’ their company’s revenues will grow in the next 12 months. That’s the same as last year; though up slightly from 36 per cent in 2013.

CEOs in the Asia Pacific region (45 per cent) are most confident of revenue growth, about the same as last year. The Middle East is still one of the most optimistic regions with 44 per cent of CEOs very confident of revenue growth, although this is down markedly from last year’s 69 per cent. CEO confidence in growth is higher in North America, rising to 43 per cent from 33 per cent. CEOs in Western Europe (31 per cent) and Central and Eastern Europe (30 per cent) are least optimistic about their company’s growth prospects.

“The world is facing significant challenges: economically, politically and socially. CEOs overall remain cautious in their near-term outlook for the worldwide economy, as well as for growth prospects for their own companies. While some mature markets like the US appear to be rebounding, others like the Eurozone continue to struggle. And while some emerging economies continue to expand rapidly, others are slowing. Finding the right strategic balance to sustain growth in this changing marketplace remains a challenge,” said Dennis M. Nally, chairman of PricewaterhouseCoopers International.

“CEO confidence is down notably in oil-producing nations around the world as a result of plummeting crude oil prices. Russia CEOs, for example, were the most confident in last year's survey, but are the least confident this year. Confidence also slipped among CEOs in the Middle East, Venezuela, and Nigeria,” he said.

CEOs rank the US as their most important market for growth over the next 12 months, placing it ahead of China for the first time since we started asking this question five years ago. Overall, 38 per cent 0f CEOs say the US is among their top-three overseas growth markets, compared with 34 per cent for China, 19 per cent for Germany, 11 per cent for the UK and 10 per cent for Brazil. Among the non-BRICS emerging markets that continue to present growth opportunities for CEOs, Vietnam is one of top choices.

CEOs say they will undertake a number of business strategies to strengthen their companies in the coming 12 months. Overall, 71 per cent say they will cut costs, 51 per cent will form strategic alliances or joint ventures, 31 per cent will outsource a business process or function, and 29 per cent will complete a domestic M&A (up from 23 per cent last year).

Over-regulation again tops the list of concerns, named by 78 per cent of CEOs worldwide. This is up six 6 points from last year and is now at the highest level ever seen in the survey. Other top concerns cited by CEOs are availability of key skills, fiscal deficits and debt burdens, geopolitical uncertainty, increasing taxes, cyber threats and the lack of data security, social instability, shifting consumer patterns and the speed of technological change.

CEOs concerns are up in all areas compared to last year with the exception of energy costs where they are slightly down at 59 per cent.

PwC's 18th Annual Global CEO Survey, 1,322 interviews were conducted in 77 countries during the last quarter of 2014. By region, 459 interviews were conducted in Asia Pacific, 455 in Europe, 147 in North America, 167 in Latin America, 49 in Africa and 45 in the Middle East.