A new PwC survey unveiled at Davos found CEOs are the most pessimistic they've ever been about the economy. The firm's global chairman breaks down 4 big reasons why.
AP Images / Markus Schreiber
- The opening day of the World Economic Forum Annual Meeting in Davos, Switzerland featured the release of PwC's latest CEO survey.
- It found that CEO pessimism about global growth is currently at a record high.
- The lack of confidence in the world economy is jarring, especially considering the strength of global markets at present time.
- At a packed briefing on the opening day of Davos, PwC global chairman Bob Moritz laid out multiple issues keeping CEOs up at night.
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DAVOS, SWITZERLAND - The World Economic Forum Annual Meeting in Davos didn't exactly start on the most positive note.
On Monday evening, as many high-ranking executives and dignitaries were still checking into their hotel suites, PwC unveiled the results of its annual CEO survey. Including responses from 1,581 officers spanning 83 territories, the report featured a jarring main takeaway: Pessimism about global economic growth is at a record.
More specifically, 53% of CEOs surveyed are predicting a decline in the rate of economic growth in 2020, up from 29% in 2019 and many multiples higher than the mere 5% registered in 2018. The sharp upward trend can be seen in the chart below.
The survey's findings were delivered to a surprised audience by Bob Moritz, PwC's global chairman. After all, with global markets fresh off a 2019 that saw nearly every major asset post impressive gains, it was difficult for many to wrap their head around such dismal expectations for economic growth.
Moritz attempted to explain what drove the record-setting pessimism by touching upon a handful of the biggest threats identified by CEOs worldwide.
They're listed below, accompanied by the percentage of CEOs who mentioned them. All quotes are attributable to Moritz and were delivered at PwC's press briefing at Davos.
1) Over-regulation (36%)
"When you look at the type of risks that CEOs identify, regulation continues to be a huge challenge consistently around the world. It may vary country by country, but the overall regulation issue is still a big phenomenon.
"There is a belief that government will act more so, which will have an impact on the technology space - the digital space. It's not only tech, but rather thinking through data and all the things within a digital agenda and economy.
"The CEOs are focused on three major themes. First, that we will end up seeing more regulation around the type of contact that's allowed or leveraged across the internet. Second, CEOs are very worried about government intervention in terms of breaking up some of the larger tech houses right now.
"And third is whether or not data is being used with some form of compensation to individuals. Those three things are what CEO believe might be coming when we think of more regulation.
"This concept of over-regulation is an interesting phenomenon to watch not just in the tech space, but even beyond that in terms of taxation, climate, and the role governments will play."
2) Trade conflicts (35%)
"The big issue today that's at top of mind for a lot of organizations and individual people is the trade conflict. It's risen significantly year-over-year.
"These CEOs are responding to a reduction in their ability to actually transact. To me, the CEOs that have a certain confidence level - those that will be sustained and survive in this economy - are the ones that can react quickest. If you look at this past year, the Chinese were the fastest to change supply chain.
"Now let's go to the other side of that equation. Even though there's a huge trade conflict issue out there, the CEOs in the US still have China as the No.1 area they'd want to invest outside of their home country. They're looking at the underlying demographics and the megatrends.
"Then, when we ask the same question of the CEOs in China - "are you going to invest in rich countries outside of your own?"- the US doesn't even make the top five anymore. The Chinese have quickly pivoted towards Southeast Asia and Australia. It comes back to the different mindsets CEOs have country by country."
3) Cyber threats (33%)
"This continues to be a big challenge globally, although it depends on the country. For example, in the UK, it's the No.1 risk that everybody is worried about."
Bonus: Climate change
While Moritz noted that climate change - one of the main focal points of Davos this year - failed to make the top 10 of overall CEO worries, he said that could soon change.
"For all of the discussion and all the dialogue that's started already here at Davos, the reality is that climate is not at the top of the CEOs' agenda for people to react to.
"CEOs and management teams and boards that will be in the successful category are those that, rather than just seeing climate as a downside risk, will see it as an upside opportunity. They'll need to ask how they can differentiate versus their competition to demonstrate they're doing something about it.
"And there's benefit to that, in terms of the type of stakeholder expectations people have. They'll see you as doing something about it. They'll be more likely to buy your product, more likely to join your organization.
"What we see today as a big opportunity, over the next couple of years, is for organizations to put climate into everything they're doing, leverage technology and artificial intelligence to find the innovations they can bring that both have a bottom-line impact, and have an impact on society.
"It's this concept of purpose and profit being together - not one or the other - is extremely important. The CEOs that understand that are doing something about it, and they have a much higher likelihood of success, even in this uncertain world."