Executives are more downbeat about the state of the global economy now than at any time this year, according to’s latest survey on economic conditions. Recent turmoil in global markets has fueled concern over the strength of respondents’ home economies—and of the world economy, too. At the same time, executives cite volatile economic conditions and exchange rates as emerging threats to both domestic and global growth in the short term.
A majority predict that oil prices will stay low in the next year, which could potentially spur future growth. It’s unclear, though, how much a growth spurt from oil prices could offset the economic risks posed by increased volatility. Executives in emerging markets are particularly concerned with volatility at home—especially in China, where four-fifths of respondents say their economy has worsened in the past six months. Across regions, the domestic and global economic outlook for the coming months is more tempered. The same is true of expectations for China’s economy, which most respondents believe will meet (or come close to) the Chinese government’s 2015 growth target of 7 percent.
Read more about Employment & Growth
What You Will Learn
Volatility on the rise
As a risk to short-term domestic growth, volatility is cited more often now than in previous surveys. At home, volatile economic conditions and exchange rates are greater worries for emerging-market executives, especially in China (Exhibit 1). Forty-nine percent of executives there cite overall economic volatility as a risk to domestic growth in the next year, compared with 27 percent of other respondents.
Volatility has also climbed as a threat to global growth in the near term. Forty-eight percent of all respondents now cite economic volatility as a top risk for the next 12 months, up from 34 percent in June; 32 percent now cite exchange-rate volatility, up from 22 percent. Volatile exchange rates are a much greater concern for emerging-market executives, who report that since June, geopolitical instability has fallen as a risk to global growth (Exhibit 2).
When asked about scenarios for growth over the next decade, the largest shares of executives believe that “global downshift” (low but resilient global growth) and “pockets of growth” (uneven, volatile, but high levels of global growth) are likeliest to occur. Compared with the previous survey, though, executives are more likely to identify “rolling regional crises” (volatile and weak global growth): 25 percent now say it’s the most likely, up from 17 percent in June.
On the exchange-rate front, many executives expect the US dollar will outperform all other currencies in the next six months. Three-quarters of executives in China and in Latin America believe that their currencies will depreciate against the dollar, and 60 percent of those in the United States say the dollar will appreciate against the renminbi. A slightly larger share of respondents in the United States (64 percent) expect the dollar to grow in value against the euro—though just one-third of eurozone respondents say the same.
Widespread economic worry
In the past four surveys, executives consistently reported modest views of the global economy; they were most likely to say that current conditions had held steady. But now, respondents in all regions are most likely to say that the global economy is worse than it was six months ago. Sixty-two percent say economic conditions have worsened (Exhibit 3)—nearly three times the share that did so in June, making this the gloomiest respondents have been about the global economy in the short term since June 2012. On average, respondents most often expect conditions to worsen in the coming months as well.
Executives in some regions are more optimistic than others about the global economy’s short-term prospects. For example, in India, 44 percent expect improved global conditions; 28 percent expect conditions will worsen, compared with roughly half of their peers in Latin America, China, and developed Asia. Still, respondents in India are more than twice as likely now as in June to expect worse conditions. And overall, emerging-market executives are much gloomier than their peers elsewhere: 76 percent say the world economy has worsened in the past six months, compared with 56 percent of executives in developed markets.
At the country level, respondents are more downbeat about short-term economic conditions than they’ve been all year, and concerns are particularly acute in Asia and Latin America (Exhibit 4). In March, 40 percent of executives in China believed that domestic economic conditions would be worse by now. But in this latest survey, fully 80 percent say conditions have worsened since March.
Executives in China are slightly more optimistic about the future than the present—though they are still likelier than many other respondents (except those in Latin America) to believe domestic conditions will worsen in the next six months. Their peers in developed Asia are equally apprehensive: 40 percent expect worse conditions in the coming months, up from 23 percent in June and 16 percent in March.
This outlook for sluggish growth comes amid ever-lower expectations for oil prices in the next year. Three months ago, the largest share of executives (45 percent) predicted that oil prices would be $60 to $80 a barrel. Now the largest share (70 percent) expect that oil will cost between $40 and $60 a barrel.
Modest prospects for China’s growth
Given the most recent responses from China, it’s not surprising that when asked specifically about the country’s economy, many executives report a cautious outlook. Forty-nine percent of all respondents believe that, in the year ahead, a sharp slowdown in China’s economic growth is very or extremely likely to shock the global economy, up from 23 percent in the previous survey.
We also asked about the expected rate of GDP growth in China, and most respondents predict that the country will meet or come close to its 2015 growth target of 7 percent. Executives in some regions—Europe and North America, specifically—are more likely than others to expect modest (and slowing) Chinese growth (Exhibit 5). Looking further ahead, to 2018, respondents are less optimistic. Nearly two-thirds of all respondents (and 59 percent in China) believe that three years from now, the annual rate of growth will be 5 percent or less.
Compared with their peers, executives in China are less worried about slowing growth. Just one-third say a sharp slowdown in Chinese growth is very or extremely likely over the next year, and 40 percent say the same about the next decade (Exhibit 6). Those in China are also more optimistic than others about the rate of GDP growth: 84 percent say the economy will grow 6 to 7 percent this year. Just 15 percent—compared with 39 percent of all other respondents—say the growth rate will be 5 percent or less.
At the same time, executives in China note concerns at the company level. They are more concerned than their peers elsewhere that demand for their companies’ products and services will decrease in the next six months. And along with executives in Latin America, they are the most likely to expect their companies’ profits will decrease.