As macroeconomic conditions deteriorate, uncertainty rises and inflation hits levels not seen in decades, chief executives of companies in Asia-Pacific have more to worry about than usual.
Some 69% of the region's chief executives believe global economic growth will decline over the next 12 months, compared with last year when 76% felt growth would improve, according to the 26th annual "Global CEO Survey-Asia Pacific" by PwC.
Strikingly, 53% of the 1,634 respondents believe their companies will not be economically viable in the next decade, if they continue on their current path. That's 14 percentage points higher than the global average.
Amid the uncertain conditions, Asia-Pacific CEOs face a dual imperative. First, they must manage short-term external risks to drive profitability in order to survive. But at the same time, they must transform to thrive in the longer term, says the survey, subtitled "Leading in The New Reality".
"At this time last year, Asia-Pacific CEOs' optimism hit a 10-year high. Just a year later, we're seeing a stark reversal of this confidence," said Raymund Chao, chairman of PwC Asia-Pacific and China.
"With continuous disruptions, CEOs in the region face a new reality. To execute the dual imperative successfully, leaders need to redefine their priorities around value creation, build a differentiated culture of empowerment, and collaborate broader and deeper than ever before."
Despite fading confidence in the global economy, Asia-Pacific executives are far less pessimistic about prospects of their own countries compared with their global counterparts. In particular, chief executives in larger Asia-Pacific countries show the highest level of optimism in domestic growth -- China (64%), India (57%) and Indonesia (50%) -- compared with just 29% globally.
The growing emphasis on national interests over global ones represents an acceleration of trends. However, the fundamentals of the region continue to be bolstered by trade liberalisation and markets welcoming foreign direct investment.
While health and cyber-risks were the top concerns a year ago, the impact of the economic downturn is the foremost issue for Asia-Pacific bosses this year, with inflation (41%) and macroeconomic volatility (30%) leading the risks for both the short term (the next 12 months) and medium term (over the next five years).
Geopolitical conflict (30%) also stands out as a top risk. The war in Ukraine and growing concern about geopolitical flashpoints in other parts of the world have caused Asia-Pacific CEOs to rethink aspects of their business models. They are planning to:
- adjust their presence in the current market and/or expand to new markets (53%),
- adjust supply chains (49%), and
- diversify their offerings (48%).
This is in contrast to global chief executives who are prioritising investment in cybersecurity and data privacy, suggesting that Asia-Pacific CEOs focus more on near-term economic impacts: preserving operating profitability and immediate cash flow generation, while deferring value creation and sustainability to the mid to long term.
"Like their Asia-Pacific counterparts, most Thai CEOs are seeing an impending recession this year. Inflation, geopolitical conflict and supply chain disruptions are all adding obstacles to doing business," said Chanchai Chaiprasit, chief executive of PwC Thailand.
"While Thailand's tourism sector is recovering, with more than 20 million foreign tourists expected in 2023, the price of electricity and other necessities are gradually rising. This has certainly impacted production costs and the competitive advantage of many industries.
"In order to navigate this year's uncertainty, we're likely to see more business leaders seeking opportunities to create value from partnerships or merger and acquisition activities to expand into new, non-core foreign markets. Product expansion and revised procurement strategies focusing on resilience to difficult situations will be key to regain consumers' trust."
To download the full Global CEO Survey-Asia Pacific, visit pwc.com/ceosurvey-asiapacific