01/22/2018

3 reasons why CEOs are optimistic about 2018

Author: Bob Moritz, Global Chairman, PwC US Bob moritz

You don’t have to look far for signs that we live in tumultuous times. Geopolitical uncertainty, cyberattacks, and jobs threatened by artificial intelligence are just a few of the topics that dominated headlines in 2017. But despite these harbingers of gloom, a record-breaking percentage of CEOs told us they are optimistic about the economic environment worldwide, at least in the short term. That’s one of the findings of PwC’s latest Global CEO Survey, launched at the World Economic Forum Annual Meeting in Davos this week. I want to focus on three highlights here:

1. Soaring short-term CEO optimism

This year’s survey showed a record jump in the all-time highest level of CEO confidence regarding global economic growth prospects for the coming year. For the first time since we asked the question in 2012, a majority (57%) of the CEOs surveyed told us they believe global economic growth will “improve”. Strikingly, this unprecedented optimism is about twice as high as last year and it is truly global — from North America to both Western and Central/Eastern Europe, as well as Africa, Latin America, the Middle East and Asia Pacific.

This confidence waned, however, when we asked CEOs about their own company’s growth in the next three years. While last year, 51% of respondents told us they were “very confident” about their organization’s longer-term growth prospects, only 45% shared that view this year.

CEOs may justifiably feel that the future is simply less predictable than it once was. With technological disruption and geopolitical unpredictability verging on commonplace, longer-term confidence may be increasingly elusive.

UC9B00222. A focus on the geopolitical positives

In the short-term, CEO optimism appears unimpeded by shake-ups such as Brexit, the Trump administration’s withdrawal from trade agreements and climate accords, and increased anxiety over North Korea. Undeterred, CEOs continue to invest in and grow their businesses.

Simply put, 2017 looks set to be the best year for the global economy since 2010. As we kick off a new year, global commodities prices have recovered from their trough and the world’s major economies are growing. Even Britain’s economy seems to be persevering despite Brexit. This upward trend is set to continue in 2018, with PwC predicting that the global economy will grow by almost 4% in purchasing power parity (PPP) terms this year.

In the US, the Trump Administration’s pro-business policies — with the notable exceptions of trade and immigration — look to be fuelling a stock market boom, corporate confidence and low unemployment. With deep corporate tax cuts, deregulation and infrastructure spending on tap for 2018, it’s no surprise that North American CEOs are our most confident survey respondents: more than half (53%) of CEOs from the region are “very confident” about their company’s growth in the next 12 months.

Only time will tell how well-founded CEOs’ short-term confidence is but the economic indicators are on their side, with booming stock markets and strong predicted GDP growth in most major markets. Also, while risks seem to grow and multiply, CEOs are, on the one hand, becoming more used to high levels of multiple risks; while on the other hand finding ways of managing them. There are plenty of potential potholes in the road ahead for business but CEOs have become better at predicting where they are and navigating around them.

3. Taking technology in their stride

Technology is affecting businesses in varied and complex ways. As we continue to hurtle through the digital age, business strategies for technology are in flux, and the numbers show that. On the one hand, technological advances — like cyberthreats and the sheer speed of change — are high on the list of concerns that keep CEOs up at night. Last year, 24% of the CEOs we spoke to told us they were “extremely concerned” about cyberthreats, but that number has jumped to 40% this year. In contrast, business leaders see enabling universal connectivity as the chief benefit of globalization.

There is no question that the impact of AI will be enormous, potentially transforming business and society at large. PwC’s recent global AI report predicts AI will contribute an additional $15.7 trillion to global GDP by 2030. But those benefits are unlikely to be shared evenly: the US and China are slated to account for 70% of the boom. There will also be winners and losers in the jobs market when machines can replace cheaper labour. Certain jobs will become redundant and new ones will be created. However, while CEOs are focused on the potential benefits of AI, they are for the time being relaxed about the impact on employment with fewer than one in five CEOs expecting to reduce headcount in the next 12 months.

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