Almost all business leaders in the world expect an economic recession – the only difference is how deep and long it will be, according to the latest EY (formerly Ernst & Young) business leaders’ sentiment study “EY CEO Outlook Pulse”.
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25% of managers expect a moderate and short-term slowdown in economic development, while 41% think that the economic recession will be moderate but persistent. Meanwhile, 18% expect a deep but short-term economic downturn, while 15% think the decline in economic development will be both deep and persistent. Only 1% of business leaders in the world do not expect an economic recession.
However, positive trends can also be observed in the EY study, namely, compared to January of this year, the number of managers who expect a “deep” economic recession is decreasing – both short-term and permanent slowdown was expected in January by as many as 50% of company managers, but now 33%. Likewise, 47% of company managers now admit that their mood regarding the expected performance of the company in the next 12 months has become more optimistic compared to the beginning of the year.
“The current economic situation creates a new challenge – there are so many complications and risks that companies become extremely reactive in their operations – they adapt to the changing situation, but in these conditions it is difficult to be strategic in the long term. This negatively affects investment decisions and development ambitions. The same applies to companies in Latvia – managers do not know what to expect from financial markets, interest rates, what will happen in Ukraine, what will happen in relations with Russia, and what is expected in the field of technology or artificial intelligence. All these risks have purely practical manifestations. Growth is still possible, but a deep and flexible modeling of future development scenarios,” says Nauris Kļava, EY partner in the Baltic States.
The EY study also reveals that only 6% of global business leaders think they will not be affected by risks from geopolitical conflicts and trade tensions in the coming year. In contrast, 22% believe that these risks will have a “very significant impact” on their companies’ operations, while another 35% believe that these impacts will be significant. They are considered “moderate” by 25% of the survey respondents.
The same is the case with macroeconomic and market instability risks – here 22% of respondents believe that they will leave a very significant impact on company operations, 34% assess these risks as significant, and 25% – as moderate.
In response to the latest trends in the field of technology, 65% of business leaders believe that artificial intelligence technologies have a promising and positive potential that will promote the efficiency of companies and create a broad, beneficial impact on the development of society. Only 10% of the survey respondents disagree with this.
Similarly, 66% of business leaders are not worried that artificial intelligence will cause people to lose their jobs, and believe that this set of technologies will create new jobs to replace lost job roles. However, 65% of business leaders also believe that more work is needed to address the social and ethical challenges and crime risks posed by artificial intelligence technologies.
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The EY study shows that in a situation of high uncertainty, company managers are considering different capital utilization strategies, however, the most, or 29%, of managers are currently creating cash reserves for future opportunities or challenges. Another 26% are considering opportunities to use the available capital for acquisitions or mergers (M&A), while 25% are directing the capital to the company’s organic growth initiatives. Finally, 20% of company managers propose to return capital to shareholders in the form of dividends or capital reduction.
2023-08-21 07:08:04
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