Business leaders and economists are bracing for a recession at the start of Davos

(Bloomberg) — The World Economic Forum’s annual meeting kicked off in Davos with corporate executives and economists warning that a global recession is likely this year.

Of the 4,410 business leaders surveyed by PricewaterhouseCoopers LLP last October and November, 73% predicted a decline in global growth over the next 12 months. The reading was the worst since the consultancy began surveying in 2011. Two in five even expressed concern that their companies might not last a decade.

A separate poll of leading economists, published by the Forum, found that two-thirds expect a global recession in 2023 as businesses cut costs; 18% believe that such a decline is “extremely likely”.

Concerns are likely to rise this week as more than 2,700 executives, bankers and economists head to the Swiss ski resort of Davos for the first time since January 2020. While recent data has fueled hopes that economies may still recover slightly, last year’s rise in inflation and subsequent interest rate hikes by of central banks have encouraged many to shrink the economy.

Read more: Forecast-defying Germany, UK may avoid recession for now

PWC Global President Bob Moritz, however, said the level of concern in his company’s survey was likely overstated.

Expectations of a slowdown have translated into predictions because people have seen it for a long time, he said. Compared to the 2008 financial crisis, bosses now fear more for the economy, but are more confident that their companies will “get through this crisis”.

Despite this, the confidence of business leaders in their own company’s growth prospects has fallen the most since the 2008 crisis.

Adapt or die

This year’s three big risks are inflation, macroeconomic instability and geopolitical conflict, the research showed.

PWC’s Moritz said the main surprise was the long-term perspective, with 40% of CEOs convinced that “their organizations will not be economically viable in 10 years if they don’t transform.”

He said: “In the short term it’s about how to manage cost pressures, and in the long term it’s about supply chains, climate, technological disruption.” Bosses need to take action now to “survive the two years to thrive in the next 10” while ensuring they have the capital to deploy for the future.

Read more: Gas slide widens inflation outlook in Europe

Last year, CEOs were concerned about cyber, health and climate threats. Moritz said that the climate crisis remains an urgent problem. “I’m not worried about him falling off the list. Things are relative – 60% to 70% of CEOs are already taking action,” he said.

Geopolitical threats are not isolated to Russia and China. “If Russia-Ukraine can happen, what else?” Moritz asked. “What about the Middle East and the role of Iran? Even the US Anti-Inflation Act is a potential risk.” The IRA’s hundreds of billions of dollars in subsidies for clean energy projects are causing geopolitical tensions in Europe.

Workers’ power

When it comes to hiring, 60% of bosses don’t plan to cut the number of employees, and 80% won’t cut compensation because they’re sticking with employees rather than going through expensive hiring processes. It is expected that the outflow of staff will be high this year as well.

“The power rests with workers who have the right skills,” Moritz said.

Business leaders in France, Germany and the United Kingdom are even less optimistic about domestic growth than they are about global expansion.

However, the UK improved as a business location of choice with CEOs ranking it as the third most important country for revenue growth, behind the US and China and tied with Germany. He had never previously been ranked higher than fourth.

©2023 Bloomberg LP

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