Confidence in global economic growth at lowest level for 12 years. The perception is less pessimistic in Romania: PwC

The vast majority (73 percent) of CEOs expect the global economy to shrink in 2023, according to the PwC CEO Survey. The response reflects the most pessimistic outlook in the 12 years since the question was first included in the survey. Moreover, the perception has reversed from 2021 and 2022, when 76 percent and 77 percent of respondents, respectively, believed that the economy would improve its growth rate.

“The last few years have put the whole of society to the test, with a pandemic, war, energy crisis, record inflation and rising interest rates, so the pessimism expressed in the current survey is not surprising. Yet Romanian CEOs are more confident about the national economy than the global economy, with 62 percent expecting a local slowdown and 75 percent anticipating a global decline. Although the perception of the macroeconomic situation has worsened, leaders in our country are more optimistic about the companies they run, with more than half anticipating business growth in the next year. This means that they have taken a potential economic downturn into account when building their strategies,” said Dinu Bumbacea, Country Managing Partner, PwC Romania.

Economic growth for Romania in 2023 is estimated at 2.6 percent by the World Bank, 3.1 percent by the International Monetary Fund (IMF) and 1.8 percent by the European Commission, which forecasts slower growth for the EU as a whole (0.3 percent) and the countries in the region: Bulgaria (1.1 percent), Hungary (0.1 percent) and Poland (0.7 percent).

Leaders in France, Germany and the UK are less optimistic about economic growth in their own countries than they are about global growth. Conversely, those in the US, Brazil, India and China are more optimistic about growth in their countries than they are about global growth.

40 percent of executives believe that their organisations will no longer be economically viable in 10 years if current conditions continue

This trend was particularly noted by respondents from the telecoms (46 percent), manufacturing (43 percent), healthcare (42 percent) and technology (41 percent) sectors.

By comparison, 27 percent of Romanian CEOs feel this way about the companies they run, although they too foresee multiple challenges for the profitability of their industries over the next 10 years.

In terms of the outlook for business growth over the next year, the percentage of CEOs who are very confident in the development of their business overall stands at 42 percent, following the biggest year-on-year drop since the financial crisis of 2008−2009.

Top three concerns: inflation, macroeconomic volatility and geopolitical conflicts

A year ago, cyber and health risks were the main concerns, but in 2023, the impact of inflation (40 percent) and macroeconomic volatility (31 percent), both in the short term and over the next five years, are the biggest worries.

For their part, Romanian executives perceive inflation as the main risk to business development (48 percent), followed by geopolitical conflict (42 percent) and macroeconomic volatility (38 percent).

CEOs cut costs but avoid layoffs or pay cuts

In response to near-term economic challenges, CEOs say that they are taking actions to spur revenue growth and cut costs. Interestingly, although 52 percent of CEOs say that they have already begun cutting costs, just 19 percent are implementing hiring freezes, and 16 percent are reducing the size of their workforce. This stands in stark contrast to what we heard from CEOs back in October and November of 2008, when about twice as many told us that they anticipated near-term headcount reductions. At the same time, 80 percent state that, to retain talent and reduce departures, they do not intend to cut salaries.

The survey data suggests that CEOs are not laying people off, in part because of their recent experience with employee attrition rates, which have surged over the last year or so in many markets, in a phenomenon that’s been referred to as the “Great Resignation”.