Fifty seven percent (57%) of business leaders say they believe global economic growth will improve in the next 12 months. It’s almost twice the level of last year (29%) and the largest ever increase since PwC began asking about global growth in 2012.
In Romania, 49% of respondents rely on accentuated global economic growth, rising from 38% in 2017.
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. 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,” comments Bob Moritz, Global Chairman, PwC.
This optimism in the economy is feeding into CEOs’ confidence about their own companies’ outlook, even if the uptick is not so large. 42% percent of CEOs said they are “very confident” in their own organisation’s growth prospects over the next 12 months, up from 38% last year.
In Romania, 38% of respondents are highly confident about companies’ perspectives to boost their revenue over the next 12 months.
Looking at the results by country, it’s a mixed bag. CEOs’ outlook improved in several key markets including in Australia (up 4% to 46%) and China (up 4% to 40%), where the share of CEOs saying they are “very confident” in their own organisation’s 12-month growth prospects rose.
In the US, CEOs’ confidence has recovered. After election nerves last year, the early focus on regulation and tax reform by the new administration has seen confidence in business growth prospects for the year ahead rising significantly – from 39% in 2017 to 52% in 2018. And North America is the only region where a majority of CEOs are “very confident” about their own 12-month prospects.
In the UK, with Brexit negotiations only recently reaching a significant milestone, business leaders’ drop in short-term confidence is unsurprising (2018: 34% vs. 2017: 41%).
The top three most confident sectors for their own 12-month prospects this year are Technology (48% “very confident”), Business Services (46%) and Pharmaceutical and Life Sciences (46%) – all exceeding the global “very confident” level of 42%.
Strategies for growth remain largely unchanged on last year’s survey – CEOs will rely on organic growth (79%), cost reduction (62%), strategic alliances (49%) and M&As (42%). There was a small increase in interest in partnering with entrepreneurs and start-ups (33% vs 28% last year).
CEO confidence in the US market extends overseas, with non-US based CEOs once again voting it the top market for growth in the next 12 months. This year, the US reinforces its lead on China (46% US vs 33% China, with the US lead over China up 2% compared with 2017). Germany (20%) remains in third place, followed by the UK (15%) in fourth place, while India bumps Japan as the fifth most attractive market in 2018.
”In Romania, a high level of confidence and forecasting a period of economic growth is not enough to achieve solid growth, as one needs political and financial stability. These two elements are essential for organic growth meant to give confidence to both local and foreign investors”, said Ionut Simion, Country Managing Partner, PwC Romania.
Confidence in short-term revenue growth is feeding into jobs growth, with 54% of CEOs planning to increase their headcount in 2018 (2017: 52%). Only 18% of CEOs expect to reduce their headcount. In Romania, 53% of respondents believe the number of employees within their companies will increase.
Healthcare (71%), Technology (70%), Business Services (67%) Communications (60%) and Hospitality and Leisure (59%) are amongst the sectors with the highest demand for new 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.
While recent research by PwC showed that workers were optimistic about technology improving their job prospects, CEOs admit that helping employees retrain, and increasing transparency on how automation and AI could impact jobs is becoming a more important issue for them. Two thirds of CEOs believe they have a responsibility to retrain employees whose roles are replaced by technology, chiefly amongst the Engineering & Construction (73%), Technology (71%) and Communications (77%) sectors. 61% of CEOs build trust with their workforce by creating transparency, at least to some extent, on how automation and AI impact their employees.
”For a continuous business growth, regardless of the field of activity, training employees the proper skills is vital. For instance, as part of the HR strategy in the technological era, 76% of CEOs in Romania and Central and Eastern Europe say their companies contribute to educating the workforce through apprenticeships. In Romania, 88% of executives say their companies implement teaching and continuing education programs as a strategy to attract employees with digital skills. Therefore, the medium and long-term curriculum must be designed to meet the needs of the business environment and focus more on digital competence”, Ionut Simion also said.
Despite the optimism in the global economy, anxiety is rising on a much broader range of business, social and economic threats. CEOs are ‘extremely concerned’ about geopolitical uncertainty (40%), cyber threats (40%), terrorism (41%), availability of key skills (38%) and populism (35%). These threats outpace familiar concerns about business growth prospects such as exchange rate volatility (29%) and changing consumer behaviour (26%).
Underlining the shift, 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.
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%). 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.
PwC conducted 1,293 interviews with CEOs in 85 countries between August and November 2017. Our sample is weighted by national GDP to ensure that CEOs’ views are fairly represented across all major countries. 11% of the interviews were conducted by telephone, 77% online, and 12% by post or face-to-face. All quantitative interviews were conducted on a confidential basis. 40% of companies had revenues of $1 billion or more: 35% of companies had revenues between $100 million and $1 billion; 20% of companies had revenues of up to $100 million; 56% of companies were privately owned.