Prospects gloomy for global economy uncertainty dampens outlook for 2012

February 07, 2012 | 14:02
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Nearly half of the 1,258 CEOs polled worldwide believe the global economy will decline even further in the next 12 months, according to PwC’s 15th Annual Global CEO Survey.

Just 15 per cent said the global economy would improve during 2012.

However, nearly three times as many CEOs are confident in their own companies’ growth prospects for the next 12 months than in the outlook for the global economy, suggesting CEOs believe they have learned how to manage through difficult and volatile economic times.  

Forty per cent of CEOs said they are ‘very confident’ of revenue growth for their companies in the next 12 months, down from the 48 per cent last year - though still up from the 31 per cent who were ‘very confident’ in 2010.

In addition more than half of CEOs worldwide expect to increase headcount in the next 12 months, although the picture changes from sector to sector with hiring much more likely in entertainment and media than elsewhere.

Unsurprisingly, the biggest decline in confidence was in Western Europe. Beset by the sovereign debt crisis, just a quarter of European CEOs said they were very confident of revenue growth, down sharply from nearly 40 per cent last year. Short term confidence also fell among CEOs in Asia Pacific, where confidence among CEOs fell to 42 per  cent from 54 per cent last year. China saw the biggest decline in confidence in the Asia Pacific region, with 51 per  cent of CEOs feeling ‘very confident’, down from 72 per cent last year.

There was also a marked decline in confidence in India with only 55 per cent of Indian CEOs very confident of revenue growth down from 88 per cent last year.

In the US, 41 per cent of CEOs said they were very confident of short term growth, down from 45 per cent last year. Confidence increased, however, among CEOs in Africa, where 57 per cent said they were expecting growth, up from 50 per cent last year.

The survey results, based on interviews with 1,258 CEOs, were released at the World Economic Forum annual meeting in Davos.

Looking at what is worrying CEOs, 80 per cent of CEOs had some concern about uncertain economic growth,  64 per cent about instability in the capital markets,  66 per cent about government responses to fiscal deficits and debt burden,  58 per cent about exchange rate volatility and 56 per cent about over regulation.

While 56 per cent of CEOs said their company had been financially affected by the sovereign debt crisis in Europe; 45 per cent said they had taken steps to respond.

“CEO confidence is decidedly down as they deal with the aftershocks to the recession. CEOs are disappointed with the course of the global economy and the pace of recovery. The optimism that had been building cautiously since 2008 has begun to recede," said Dennis Nally, chairman of PricewaterhouseCoopers International.

“The ongoing debt crisis in the European Union, along with other lingering economic uncertainties, have deflated confidence in business growth around the world.  Even the fast growing economies of Asia and Latin America are not immune to the realities of continued economic stagnation, belying the notion that the global economy has decoupled.  CEOs all around the world are concerned about the health of the global economy.

“The good news is that the long cycle of the slowdown has taught CEOs how to manage their businesses with ever greater efficiencies,” Nally added. “CEOs now say they are better prepared to deal with an economy defined by volatility in global markets, weak demand in developed economies, and uncertainty in the emerging markets. Many CEOs are confident they can deliver revenue growth despite the difficult conditions."

Longer term, CEO confidence also declined; 46 per cent said they were 'very confident' of growth prospects in the next three years, down five percentage points from last year. CEOs in Western Europe and Latin America were least confident of long term growth, while 54 per cent of North American CEOs were very confident of long term growth.

By Song Ngoc

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