Vietnam’s Growth Prospects Remain Positive amid Pessimism in Global Economy

10:24:36 AM | 24/2/2020

There is optimism among CEOs in Asia Pacific, with 35% expecting improvement and 15% looking forward to “great improvement” in the next 12 months, the highest proportion among global regions. This is consistent with results from the latest APEC CEO survey in 2019, where 34% of business leaders in the region (and 49% Vietnam CEOs) share a positive outlook for business growth in the year ahead, despite the declining trend overall.

As we have entered a new decade, CEOs are showing record levels of pessimism in the global economy, with 53% predicting a decline in the rate of economic growth in 2020. This is up from 29% in 2019 and just 5% in 2018 – the highest level of pessimism since we started asking this question in 2012. By contrast, the number of CEOs projecting a rise in the rate of economic growth dropped from 42% in 2019 to only 22% in 2020.

These are some of the key findings of PwC’s 23rd survey of almost 1,600 CEOs from 83 countries across the world, recently launched at the World Economic Forum Annual Meeting in Davos, Switzerland.

CEO pessimism over global economic growth is particularly significant in North America, Western Europe and the Middle East, with 63%, 59% and 57% of CEOs from those regions predicting lower global growth in the year ahead.

Meanwhile, there is optimism among CEOs in Asia Pacific, with 35% expecting improvement and 15% looking forward to “great improvement” in the next 12 months, the highest proportion among global regions. This is consistent with results from the latest APEC CEO survey in 2019, where 34% of business leaders in the region (and 49% Vietnam CEOs) share a positive outlook for business growth in the year ahead, despite the declining trend overall.

“There is mutual optimism among Vietnam and APEC CEOs for the year ahead, with Asia – Pacific remaining a significant destination and source of FDI fostered by resilient domestic growth in most of the region. However, taking into account the global landscape of uncertainties, it’s important for businesses to stay agile and cognizant of evolving factors to readily navigate and adapt to any challenges ahead,” said Ms. Dinh Thi Quynh Van, PwC Vietnam General Director.

“On a brighter note, while there is record pessimism amongst business leaders, there are still real opportunities out there. With an agile strategy, a sharp focus on the changing expectations of stakeholders, and the experience many have built up over the last ten years in a challenging environment, business leaders can weather an economic downturn and continue to thrive,” commented Mr. Bob Moritz, Chairman of the PwC Network.

CEOs are also not so positive about their own companies’ prospects for the year ahead, with only 27% of CEOs saying they are “very confident” in their own organization’s growth over the next 12 months – the lowest level we have seen since 2009 and down from 35% last year.

When asked about their own revenue growth prospects, the change in CEO sentiment has proven to be an excellent predictor of global economic growth. Analyzing CEO forecasts since 2008, the correlation between CEO confidence in their 12-month revenue growth and the actual growth achieved by the global economy has been very close. If the analysis continues to hold, global growth could slow to 2.4% in 2020 below many estimates including the 3.4% October growth prediction from the IMF.

In 2019 when asked about the top threats to their organization’s growth prospects, uncertain economic growth ranked outside the top ten concerns for CEOs at number twelve. This year it has leapt to third place, just behind trade conflicts – another risk that has risen up the CEOs agenda – and the perennial over-regulation, which has again topped the table as the number one threat for CEOs.

CEOs are also increasingly concerned about cyber threats and climate change and environmental damage, however despite the increasing number of extreme weather events and the intensity of debate on the issue, the magnitude of other threats continues to overshadow climate change which still does not make it into the CEOs’ top ten threats to growth.

While CEOs around the world express clear concerns about the threat of over-regulation, they are also predicting significant regulatory changes in the technology sector. Globally over two-thirds of CEOs believe that governments will introduce new legislation to regulate the content on both the internet and social media, and to break up dominant tech companies. A majority of CEOs (51%) also predict that governments will increasingly compel the private sector to financially compensate individuals for the personal data that they collect.

However, CEOs are of two minds as to whether governments are striking the right balance in designing privacy regulation between increasing consumer trust and maintaining business competitiveness, with 41% saying it does strike the right balance and 43% saying it doesn’t.

“Vietnam witnessed an increase in the number of cyber attacks and data leakages in 2019 and the country has been among the top targets for cyber attacks in recent years. The causes may be due to inadequate data protection or non-compliance of relevant best practice standards. To mitigate cyber and privacy risks, the Vietnamese government has released a few cybersecurity laws and circulars” said Mr. Pho Duc Giang, Director at PwC Vietnam Cybersecurity Services Company. “To leverage growing business opportunities in the digital economy’s booming period, Vietnam enterprises need to actively prepare for new challenges by adapting and complying with up-to-date domestic as well as international standards on cybersecurity and privacy in a resilient manner,” he suggested.

While the shortage of key skills remains a top threat to growth for CEOs and they agree that retraining/upskilling is the best way to close the skills gap, they are not making much headway in tackling the problem with only 18% of CEOs saying they have made “significant progress” in establishing an upskilling program. This sentiment is echoed by workers. In a separate survey by PwC, 77% of 22,000 workers around the world say they would like to learn new skills or retrain but only 33% feel they have been given the opportunity to develop digital skills outside their normal duties.

Although climate change does not appear in the top ten threats to CEOs’ growth prospects, CEOs are expressing a growing appreciation of the upside of taking action to reduce their carbon footprint. Compared to a decade ago, when we last asked this question, CEOs are now twice as likely to “strongly agree” that investing in climate change initiatives will boost reputational advantage (30% in 2020 compared with 16% in 2010) and 25% of CEOs today compared with 13% in 2010 see climate change initiatives leading to new product and service opportunities for their organization.

By Duy Anh (Vietnam Business Forum)