Global CEOs confident on economy despite global political turmoil

06 October 2023 4 min. read
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Geopolitical uncertainty is now rated as the greatest risk to growth by CEOs, according to a new global poll. However, a rising number of leaders are confident that the economy will perform well – at almost three-quarters of respondents.

Big Four professional services firm KPMG has surveyed more than 1,300 CEOs from the world’s largest businesses, to find out what they believe the prospects are over the coming three years. While a number of new challenges have risen to the top of their agendas in the last 12 months, the results of the ‘CEO Outlook Survey 2023’ still show a steadfast belief in the strength of the global economy.

In last year’s study – at the height of a global inflation spike, which had caused a cost-of-living crisis which hobbled growth across many of the world’s largest economies – 71% of business leaders were still confident of growth in the coming three years. Now, as inflation finally begins to fall, an increased 73% of respondents told KPMG they were confident in the economy until the end of 2026. That is not to say they do not anticipate trouble ahead, though.

There has been a significant shift across CEOs’ views on what constitutes a risk to their business. With tensions between the world’s two largest economies, the US and China, continuing to simmer – and threatening to upend supply chains on top of the continued impacts of the Russia-Ukraine war – geopolitics and political uncertainty are now ranked as the greatest risk to growth despite not being considered a top five risk last year. This persistent flux in global politics, trade dynamics and international relations has compelled CEOs to reassess their strategic priorities and demonstrate resilience in navigating the intricate interplay of global political forces.

At the same time, spikes in interest relating to the inflation crisis weigh heavily on the minds of businesses. A 77% majority of businesses believe higher costs of lending, and tightened monetary policies could risk or prolong the threat of a global recession. The cost is already said to be behind the dramatic fall in M&A activity through the last two years – and has also exacerbated the cost-of-living crisis, as households have found it harder to borrow money to make ends meet while their wages fail to keep pace with inflation. Those same lingering pressures are also a major concern for bosses – with 77% of CEOs believing that cost-of-living pressures are likely to negatively impact their organisation's prosperity over the next three years.

Positive change

All this has placed notable pressure on the ESG spending of top companies. All respondents have annual revenues over $500 million, and a third of the companies surveyed have more than $10 billion in annual revenue – but as firms continue to prioritise partner payouts and shareholder dividends, a year of polarising debate has left the environmental, social and governance work of executives under intense scrutiny.

In spite of those pressures, most have pushed ahead with plans, though. A 69% chunk of CEOs had embedded ESG into their business as a means of value creation, helping to ensure it remains an integral part of their business operations and long-term corporate strategies. At the same time, 35% of CEOs have changed the language they use to refer to ESG both internally and externally. This signals a trend towards CEOs getting more specific about each aspect of the acronym and prioritising their efforts where they can have the most impact.

KPMG Head of Global ESG John McCalla-Leacy commented, “Despite increasing economic and political uncertainty, the latest survey findings reflect a growing sense of resilience and focus from CEOs on ESG. Topics like the climate crisis have become polarised in some regions, but business leaders have told us they’re prepared to take tough, ethical decisions and stances to ensure that they play a positive role in driving the transition to more sustainable operations, which benefits everyone. It will undoubtedly be a test of nerves for many CEOs, but the data shows that the vast majority of senior executives are now fully onboard and recognize that E, S, and G are no longer optional extras for successful, sustainable businesses.”

There are some promising new trends, which give CEOs more hope for the coming period, however. In particular, CEOs are continuing to invest heavily in generative AI in search of a competitive edge for the future, listing the technology as a top investment priority in the medium term. Around 70% of CEOs agree that generative AI remains high on their list of priorities, with 52% expecting to see a return on their investment in three-to-five years. Firms should be careful not to get swept up in the hype, though, if they are to get the most from these substantial investments.

KPMG International Global Chief Digital Officer Lisa Heneghan added, “AI is unquestionably the internet moment of our time. It’s essential for CEOs to lead from the front, ensuring their organisations develop or adopt responsible, robust AI frameworks, upskill their workforce and relentlessly focus on safeguarding and governance – to reinforce that AI can genuinely unlock value for the business, its people and wider society.”