Riyadh, July 06, 2023
KPMG, a leading provider of audit, tax and advisory services in the Kingdom of Saudi Arabia, has unveiled their latest CEO Outlook, titled ‘Gearing up for growth and governance,’ which provides perspectives on the global and local business and economic landscape over the next three years.
The insights are based on the perspectives of 1,325 CEOs from around the world, including 50 based in Saudi Arabia, and reveal CEOs still anticipate long-term global growth but are prepared to weather short-term geopolitical and economic challenges.
Confidence in global economic growth over the next three years has rebounded from early 2022 to 71 percent. In Saudi Arabia, CEO confidence in global growth stands at 60 percent, while confidence in the Kingdom’s own growth prospects over the next three years reached 74 percent.
“While it is unsurprising that the economic climate is a top concern for business leaders, they have learned to navigate the unpredictable by realigning their workforces, untangling supply chain disruptions, and adapting to geopolitical and economic impacts over the last three years,” commented Dr. Abdullah Al Fozan, Chairman & CEO at KPMG in Saudi Arabia.
“Given the global ambiguity of the times, it should come as no surprise that pandemic fatigue and economic uncertainty – inflation, rising interest rates – were the two largest concerns for CEOs in Saudi Arabia and around the world in our latest survey,” he added.
Despite new headwinds, global growth expectations have not only reached but surpassed pre-pandemic levels for the first time. The distribution of CEOs that were surveyed in Saudi Arabia paints a rich picture of economic variety: energy (20 percent), infrastructure (20 percent), automotive (10 percent), manufacturing (10 percent), consumer and retail (8 percent), banking (8 percent), and telecommunications (8 percent).
Nine out of 10 CEOs globally believe a recession will occur over the next year, but most think it will be mild and short. In Saudi Arabia, only 20 percent of CEOs foresee a recession. Compared to 76 percent of their counterparts worldwide, only a third of CEOs in Saudi Arabia are actively preparing their business for this expected contraction.
Almost 63 percent in the Kingdom and 73 percent globally predict a recession will upend growth by 2025, and nearly three-quarters of global CEOs and 70 percent of those in Saudi Arabia believe a recession will make post-pandemic recovery harder, impacting their earnings.
However, the CEOs are better prepared to weather short-term challenges than two years ago, thanks to new resiliency measures. In Saudi Arabia, CEOs said they were focused on boosting productivity (60 percent), managing costs (28 percent), and reconsidering digital transformation strategies (46 percent).
As CEOs take steps to insulate their businesses from a possible recession, the survey suggests that progress on ESG suffers as fears of a broader contraction grow stronger. Amidst ongoing economic uncertainty, almost half of the CEOs in Saudi Arabia and half of those worldwide are pausing or reconsidering their existing or planned ESG efforts over the next six months.
“As the possibility of recession looms, many are already prepared with a deep focus on planning and agility. Some see opportunities through this fog of uncertainty brought on by the promise of harnessing better technology, talent, and ESG,” added Al Fozan.
For those in Saudi Arabia, the three most important strategies cited for achieving organizational growth over the next three years were organic growth (26 percent), strategic alliances (24 percent), and managing geopolitical risks (16 percent).
Due to broader economic concerns, high appetites for mergers and acquisitions through 2025 have slightly decreased by 12 percentage points among CEOs in Saudi Arabia, from 42 percent in 2021 to 30 percent today.
“This does not mean they are no longer bullish; 54 percent of Saudi Arabia-based CEOs still have a moderate appetite for mergers and acquisitions,” Al Fozan concluded.