Global CEOs more pessimistic on economic growth in 2019, says PwC

More than 40% of survey respondents see improved outlook over the next 12 months

IMF managing director Christine Lagarde. The Washington-based lender downwardly revised its global GDP forecasts for 2019 on trade uncertainty and other risks. AFP
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Global business leaders are less optimistic about economic growth prospects than they were this time last year, as shrinking fiscal stimuli and ongoing trade tensions prompt uncertainty and caution, a PwC survey shows.

Almost 30 per cent of those surveyed said they believed global economic growth would decline in the next 12 months, approximately six times more than the 5 per cent of respondents in last year's survey – a record jump in pessimism, the global consultancy said in its 22nd annual CEO outlook survey.
In the 2018 survey, there was an increase in optimism levels, with 57 per cent of respondents predicting rising economic growth, compared to 29 per cent the previous year.

Some 42 per cent still see an improved economic outlook in 2019, according to the latest survey, which collected responses from 1,378 chief executives from across 90 territories.

“With the rise of trade tension and protectionism it stands to reason that confidence is waning,” said Bob Moritz, global chairman at PwC, in a statement.

Chief executives’ views of the global economy are mirroring outlooks from key economic agencies, which are adjusting their forecasts downward in 2019, he added. The International Monetary Fund, for example, now projects global gross domestic product to grow by 4.5 per cent in in 2019, down from 4.6 per cent in 2018. It is 0.2 per cent lower from than the Washington-based lender’s last forecasts made in October.

“What we have forecast is a very modest slowdown ... but what we’re seeing on the horizon are bigger risks and they’re closer to us,” IMF managing director Christine Lagarde told CNN during the World Economic Forum in Davos this week. "A few rooms have been fixed a bit but there’s a lot of work that needs to be done.”

The global financial sector has significantly improved in terms of regulatory architecture, capital ratio requirements for banks and overall exposure to financial risk, she added.

However, there remain significant macroeconomic risks ahead, including the worsening trade environment due to “the inability of the big players to find an arrangement on trade and tariffs and how they're going to deal with each other.” Policy uncertainty and skills gaps in some markets compound the more negative outlook.

Global chief executives’ views on global economic growth are more polarised in this year’s survey compared to 2018, according to PwC, but overall they are trending downward. The most pronounced shift was among business leaders in North America, where optimism dropped to 37 per cent, from 63 per cent in 2018 due to ongoing trade tensions and the tapering of the US fiscal stimulus rolled out in 2018.

The Middle East also saw a big drop in business sentiment and prospects of growth, to 28 per cent of total respondents from the region, from 52 per cent last year, “due to increased regional economic uncertainty”, PwC said.

The drop in confidence among leaders has impacted their own companies’ international expansion plans, the survey showed. The US narrowly retained its position as the top market for growth with 27 per cent of respondents reporting plans to expand in this market, down from 46 per cent in 2018.

The second most attractive market, China, also saw its popularity fall to 24 per cent, down from 33 per cent last year . China’s economy grew at its slowest annual rate since 1990 in the fourth quarter of 2018.

Overall, India saw the biggest increase in popularity among business leaders in this year’s survey. It recently surpassed China as the fastest growing large world economy.