World’s CEOs Optimistic About the Global Economy in 2018, But Fear Geopolitical Uncertainty, Cyber Threats

Add one more drum to the marching band playing hallelujahs regarding the prospects of the global economy in 2018. In PwC’s latest CEO survey, the 21st in the series, 57% of 1,293 business leaders polled in 85 countries, believe that global economic growth will improve in the next 12 months. The survey was done between August and November 2017.

The proportion of optimistic business leaders is almost twice the level of last year (29%) and the largest ever increase since PwC began asking about global growth in 2012, said the accounting firm.

Optimism in global growth has more than doubled in the US (59%) after a period of uncertainty surrounding the election (2017: 24%). Brazil also saw a large increase in the share of CEOs who are optimistic global growth will improve (+38% to 80%). And even among the less optimistic countries such as Japan (2018: 38% vs. 2017: 11%) and the UK (2018: 36% vs. 2017: 17%), optimism in global growth has more than doubled since last year.

“CEOs’ optimism in the global economy is driven by the economic indicators being so strong,” said Bob Moritz, PwC Global Chairman. “With the stock markets booming and GDP predicted to grow in most major markets around the world, it’s no surprise CEOs are so bullish.”

Confidence in short-term revenue growth

The optimism around the global economy is feeding into CEO confidence about the outlook for their own company. Four out of ten (42%) said they are “very confident” in their own organization’s growth prospects over the next 12 months, up from 38% last year.

CEO outlook improved in several key markets, including Australia (up 4 percentage points to 46%) and China (up 4 percentage points to 40%). Confidence in their company’s prospects also recovered in the US, from 39% in 2017 to 52% in 2018.

By sector, the three most confident industries are technology (48% “very confident”), business services (46%) and pharmaceutical and life Sciences (46%).

Jobs and digital skills

The survey also found that confidence in short-term revenue growth is feeding into jobs growth. The majority of CEOs (54%) plan to increase headcount in 2018 (2017: 52%). Only 18% of CEOs expect to reduce the size of their workforce.

Healthcare (71%), technology (70%), business services (67%), communications (60%) and hospitality and leisure (59%) are among the sectors that show the highest demand for recruits.

On digital skills specifically, over a quarter (28%) of CEOs are extremely concerned about their availability within the country they are based, rising to 49% extremely concerned in South Africa, 51% in China and 59% in Brazil.

Overall, 22% of CEOs are extremely concerned about the availability of key digital skills in the workforce, 27% in their industry and 23% at the leadership level.

Threats to growth                                               

Despite the optimism, anxiety is rising on a much broader range of business, social and economic threats, says the PwC report. CEOs are ‘extremely concerned’ about geopolitical uncertainty (40%), cyber threats (40%), terrorism (41%), availability of key skills (38%), and populism (35%).

These threats have sped ahead of more familiar concerns about business growth prospects such as exchange rate volatility (29%) and changing consumer behavior (26%).

Extreme concern about terrorism doubled (2018: 41% vs 2017: 20%) and terrorism enters the top 10 threats to growth. The threat of over-regulation remains the top concern for CEOs (42% extremely concerned), and over a third (36%) remain concerned about an increasing tax burden.

Availability of key skills is the top concern for CEOs in China (2018: 64% extremely concerned vs. 2017: 52%). In the US (63%) and the UK (39%), cyber has become the top threat, displacing over-regulation. In Germany, cyber jumped from being the fifth threat in 2017 to third place (28%) this year.

A year after the Paris Agreement was signed by over 190 nations, which saw countries commit to voluntary action on climate change and low carbon investment, CEOs’ concern about the threat of climate change and environmental damage to growth prospects has now doubled to 31% of CEOs (2017: 15%).

According to PwC, high-profile extreme weather events and the US withdrawal from the Paris Agreement have significantly raised the profile of business action on climate risk, regulation and resilience. In China, over half (54%) of business leaders are extremely concerned about climate change and environmental damage as a threat to business growth, equal with their levels of concern about geopolitical uncertainty and protectionism.

“The higher level of concern is being driven by larger societal and geopolitical shifts rather than the dynamics of business leaders’ own markets,” says Moritz. “It’s clear their mid to long-term confidence in revenue growth is tempered by threats the business world is not used to tackling directly itself.”
 

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