PwC annual global survey finds Middle East CEOs the most pessimistic

PwC has released its annual global CEO survey for 2019, and the outlook among Middle East bosses is far from bullish.

Now in its 22nd edition, the Big Four professional services firm PwC has released its eagerly awaited annual CEO survey to kick off proceedings at Davos, and, after last year’s record levels of optimism, the mood among the world’s business chiefs has notably soured – with a six-fold increase in those stating a pessimistic outlook for economic growth in the year ahead. And the Middle East has the world’s highest share of doubters.

Conducted toward the end of last year among 1,378 chief executives from more than 90 territories, PwC’s Annual Global CEO survey has since 1997 sought to test the pulse of the global business climate. And with half of those interviewed helming organisations raking in more than $1 billion in revenues, the survey has become somewhat of a reliable barometer for predicting global GDP growth in the year ahead.

This year, those who believed there would be higher global economic growth over the next twelve months dropped from last year’s high of 57 percent down to just 42 percent. Even more telling, the share of CEOs who felt the opposite, that growth would decline, jumped a staggering 436 percent – or, in plain terms, rose nearly six-fold from 5 percent last year to a seven-year high of 29 percent, with those in the neutral camp the lowest in a decade.

Following on from last year, the Middle East cohort now holds the outright highest share of pessimistic global growth sentiment in the world. For 2018, one tenth of local CEOs held the view that the growth rate of the global economy would decline – equal to Africa – with Middle East CEOs now claiming the outright mantle at 38 percent, ahead of the 33 percent negative rate recorded in Western Europe. Africa meanwhile is now among the lowest at 25 percent.  

But another newer trend among local CEOs has also emerged. The Middle East now also has the lowest share of optimistic CEOs (those who believed there would be growth in the global economy) – at just 28 percent – down from 52 percent last year, and eclipsing the 45 percent and 41 percent recorded in Central Eastern Europe and Africa last year, each region which dropped only marginally as to growth expectations from 2018 (Africa by just one percentage point).

The reason this may be of concern; PwC this year took a look back at past survey results to determine the predictive power of the world’s leading CEO’s, finding a strong correlation over the past decade between executive sentiment and the actual rate of global GDP growth in the following year – particularly as to the level of 12-month confidence for personal revenue growth. This year that figure dropped seven points to 35 percent, the lowest since 2010.

And the news potentially gets worse. CEOs reporting a high level of confidence for revenue growth in their own organisations over the next three-years is also dropping sharply, from more than half in 2017 down to just 36 percent this year – with the only previous survey in which the three-year confidence dipped below the global twelve-month outlook being in the lead-up to the 2007-2008 recession; the three-year figure now close to par with the one recorded in 2009.

In terms of what has the business world spooked, ‘policy uncertainty’ has jumped from nowhere to take the second spot of extreme concerns occupying the mind of global CEOs (behind ‘over-regulation, which has consistently held the top spot since the inception of the survey). Following ‘policy uncertainty’ was another two of last year’s top-five concerns in ‘the availability of key skills’ and ‘cyber-threats’, while ‘trade conflicts’ has emerged as a not unexpected new top-five entry. Concerns for terrorism have dropped dramatically, from 41 percent to 13 percent.

One quirk this year, while business and economic growth confidence is dramatically down, ‘extreme’ concern for given specific threats to business is lower almost across the board in percentage terms, with extreme concern for ‘cyber-threats’ for example dropping by ten points from 40 to 30 percent. For the Middle East, ‘geopolitical uncertainty’ was by far the biggest concern, locally and for anywhere else in the world, at 53 percent ahead of cyber threats and policy uncertainty. Another primary concern for Middle East CEOs not registering at the top of the list elsewhere around the world was ‘the speed of technological change’ (which globally dropped by 38 percent to 28 percent this year) – cited by 35 percent of local business leaders as of extreme concern. This response can perhaps grant insight into another regional anomaly uncovered by the survey, which corresponds to a recent report from BCG; local CEOs report the highest expectations as to artificial intelligence, while remaining among the slowest internationally to act.

Altogether, 78 percent of Middle East CEOs agree that AI will have a larger impact on the world than the internet revolution, 60 percent agreeing and 18 percent strongly so, while in North America just 44 percent of respondents were in agreement, and only 10 percent strongly. Meanwhile, just 31 percent of Middle East businesses have implemented AI to any degree, ahead of only Africa and behind North America at 45 percent. Bizarrely, 28 percent in the Middle East still have no plans to pursue any AI initiative, despite only 15 percent believing the technology will have less of an impact than the internet.

“The prevailing sentiment this year is one of caution in the face of increasing uncertainty. With the rise of trade tension and protectionism, it stands to reason that confidence is waning,” concluded PwC Global Chairman Bob Moritz, before adding a positive spin. “The results of this year’s CEO survey may seem sobering to some, but they also provide reason for hope. The world’s senior decision makers are realistic this year about the challenges facing them, and this may incent them – and their organisations – to act.”