DAVOS • Chief executive officers around the world have grown a lot more pessimistic about the global economic outlook because of trade disputes and tense relations between major powers, a survey showed on the eve of the World Economic Forum in Davos, Switzerland.
The PwC survey of nearly 1,400 CEOs found that 29 per cent believe that global economic growth will decline over the next 12 months - six times the level last year and the highest percentage since 2012.
The most pronounced shift was among business leaders in the United States, where optimism dropped to 37 per cent from 63 per cent a year ago, against the backdrop of an economic slowdown and a trade war with China.
But the share of CEOs who believe the growth rate will fall increased significantly across every region, and this translated into a drop in business leaders' expectations that their companies will be able to grow revenues both in the short term and the medium term.
"It is quite a reversal from last year, and the gloomier mood cuts across just about everywhere in the world," said Mr Bob Moritz, global chairman at audit and accounting multinational PwC.
"With the rise of trade tension and protectionism, it stands to reason that confidence is waning."
VOICES FROM WORLD ECONOMIC FORUM
What do you like when you are a cross-country skier? Good visibility, no uncertainty. You like it when it is kind of stable and eventually when it is a little bit downhill - risks down, no hazards along the way. The third thing you like is everybody skiing in the tracks.
INTERNATIONAL MONETARY FUND MANAGING DIRECTOR CHRISTINE LAGARDE, at a press conference on Monday, the first day of the WEF, comparing the global economy's current situation to the travails of a cross-country skier.
I was born during the Holocene - the 12,000 (year) period of climatic stability that allowed humans to settle, farm and create civilisations. In the space of my lifetime, all that has changed. The Holocene has ended. The Garden of Eden is no more. We have changed the world so much that scientists say we are in a new geological age: the Anthropocene, the age of humans. We need to move beyond guilt or blame and get on with the practical tasks at hand.
SIR DAVID ATTENBOROUGH, naturalist and broadcaster, speaking at the start of the WEF. He urged political and business leaders to tackle climate change before it is too late.
China is slowing down, but it is not going to be a disaster.
DR FANG XINGHAI, vice-chairman of China's Securities Regulatory Commission, a key government watchdog.
The International Monetary Fund on Monday cut its world economic growth forecasts for this year and next because of weakness in Europe and some emerging markets, and said that failure to resolve trade rows could further destabilise a slowing global economy.
In its second downgrade in three months, the global lender also cited a bigger-than-expected slowdown in China's economy and a possible no-deal Brexit as risks to its outlook, saying these could worsen market turbulence in financial markets.
The US government shutdown - which is keeping President Donald Trump away from the gathering of the global political and business elite in Davos, which runs from yesterday to Friday - is also contributing to the sense of malaise and is expected to hit the US economy.
The impact of the trade dispute between China and the US, the world's two largest economies, ranked among the top concerns for business leaders in several regions.
Mr Trump has vowed to increase tariffs on US$200 billion (S$272 billion) worth of Chinese imports on March 2 if China fails to address intellectual property theft, forced technology transfers and non-tariff barriers.
As a result, Chinese CEOs have diversified their markets for growth, with only 17 per cent selecting the US, down from 59 per cent last year.
"Australia seems to be the principal beneficiary; not even in China's top 10 last year, it has risen to the No. 1 destination for Chinese investment," the report said.
Still, in China, 62 per cent of business leaders are adjusting their supply chain and sourcing strategy, pivoting away from the US, because of concerns about the future of trade relations between the two countries.
Another strategic shift highlighted by the report is businesses' tendency to hunker down and turn inward instead of looking for expansion abroad or through acquisitions.
When asked what they would focus on to drive revenue growth over the next 12 months, 77 per cent of the CEOs said "operational efficiencies" and 71 per cent said "organic growth".
Highlighting the growing uncertainty, 15 per cent of them could not identify a single country for growth opportunities away from their home base, PwC said.
As the clock ticks towards the March 29 deadline for Britain's exit from the European Union, only 8 per cent of respondents picked Britain as one of their most important foreign markets for growth prospects in the next 12 months, down from 15 per cent a year ago.