EY Study: Majority of CEOs fear recession will be worse than the financial crisis

EY Study: Majority of CEOs fear recession will be worse than the financial crisis

The vast majority of CEO respondents (98%) are bracing for an economic downturn characterized by geopolitical tensions

  • 32% of respondents are halting planned investments due to geopolitics
  • 89% will look to leverage deals over the next 12 months to secure growth
  • Investment in sustainability and talent seen as ways to emerge stronger from the downturn

The vast majority of CEO respondents (98%) are bracing for an economic downturn characterized by geopolitical tensions, supply chain disruption and ongoing COVID-19-related uncertainty, but appear split on its length, depth and severity. These are some of the findings of the EY CEO Outlook Pulse – January 2023 that underline the uncertainty that looks set to define the business environment in 2023.

The survey, which recorded the views of 1,200 CEOs across the globe on their prospects, challenges and opportunities, found that 48% foresee a moderate slowdown in the global economy, while more than half (55%) of those preparing for a persistent downturn fear a recession worse than the global financial crisis of 2007-08 in terms of its length and severity.

For the first time since 2020 (inaugural CEO Outlook survey) restrictive regulatory, trade and investment policies (28%) have superseded COVID-19-related issues (19%) as the key reason for CEO respondents altering investment plans. As a result of these exacerbated geopolitical challenges, 97% of respondents are reviewing their plans with 44% delaying a planned investment and almost a third (32%) stopping planned investments altogether.

Almost a third (32%) of respondents consider uncertainty around the direction of monetary policy and an increase in the cost of capital to be the greatest risks to future growth for their business. While concerns over COVID-19-related uncertainty have receded, almost a third of CEOs (32%) still cite this as a key risk to their business (down from 43% in October 2022).

Peter Latos, Partner, Consulting, Strategy and Transactions Leader, EY Romania: “Notwithstanding growing economic headwinds fuelled by the geopolitical fallout from the ongoing war, Romania, despite its proximity to Ukraine, continues to buck the trend and is expected to deliver low single digit GDP growth in 2023. However, this does not mean that CEOs in Romania will be insulated from a global economic downturn. The fact that 89% of respondents are considering dealmaking of one form or another in the next 12 months resonates strongly with activity seen in the Romanian market, which recorded an increase in the number of deals in 2022 with no sign yet of this slowing. CEOs should reassess business fundamentals now, double down on core strengths and take bold decisions to address areas opportunities to drive organizational improvement.

CEOs eye deals and investments in sustainability and people as routes to growth

Despite the negative outlook, CEOs are on the lookout for opportunities to gain a competitive advantage. Dealmaking of one kind or another remains a priority for respondents (89%) over the next 12 months with nearly half (46%) planning to move ahead with M&A, 58% with a joint venture or strategic alliances, and 34% with divestments.

To further shift the dial and emerge stronger and more competitive from the downturn, 39% of respondents are planning to increase investment in sustainability as a core aspect of their strategy and offering, including net-zero and other environmental and societal priorities. In addition, more than a third (36%) plan to increase their investment in talent, including workforce well-being and skills development. The majority of CEO respondents (70%) agree that flexible working will be critical to reducing employee churn and attracting new talent.

About EY Romania

EY is one of the world's leading professional services firms with 365,399 employees in more than 700 offices across 150 countries, and revenues of approx. $45,4 billion in the financial year that ended on 30 June 2022. Our network is the most integrated worldwide, and its resources help us provide our clients with services allowing them to take advantage of opportunities anywhere in the world.

With a presence in Romania ever since 1992, EY is the leading company on the market of professional services. Our more than 900 employees in Romania and Moldova provide integrated services in assurance, tax, strategy and transactions, and consulting to clients ranging from multinationals to local companies.

Our offices are based in Bucharest, Cluj-Napoca, Timisoara, Iasi and Chisinau. In 2014, EY Romania joined the only global competition dedicated to entrepreneurship, EY Entrepreneur Of The Year. The winner of the national award represents Romania at the world final taking place every year in June, at Monte Carlo. The title of World Entrepreneur Of The Year is awarded in the world final. For more information, please visit: www.ey.com

About the EY 2023 CEO Outlook Pulse

The EY 2023 CEO Outlook Pulse survey aims to provide valuable insights on the main trends and developments impacting the world’s leading companies as well as business leaders’ expectations for future growth and long-term value creation.

It is a regular “pulse” survey of CEOs from large companies around the world, conducted by Longitude Research Limited, a Financial Times company.

In November 2022, Longitude surveyed on behalf of the global EY organization a panel of 1,200 CEOs in 22 countries and across six industries. Respondents represented the following industries: advanced manufacturing and mobility, consumer products and retail, energy and resources, financial services, health sciences and wellness, technology, media and telecoms.

Surveyed companies’ annual global revenues were as follows: less than US$500m (20%), US$500m–US$999.9m (20%), US$1b–US$4.9b (30%) and greater than US$5b (30%).

The CEO Imperative series provides critical answers and actions to help CEOs reframe their organization’s future. For more insights in this series visit ey.com/en_gl/ceo.