Thomas BabychanAccording to KPMG 2022 CEO Outlook published by international accounting organisation KPMG on Tuesday, 86 per cent of chief executive officers in the world believe that there would be a recession in global economy within the next 12 months.
KPMG 2022 CEO Outlook which surveyed 1,325 CEOs between July 12 and August 24, 2022 clearly indicates that the business world expects a global recession as part of recent economic turmoil caused by Russian war in Ukraine. Russian special military operation in Ukraine and the western sanctions on Russia had caused widespread inflation in major economies.
Even though a large majority of CEOs feel that a recession is bound to happen in next 12 months, 56 percentage of them believe that the recession would be mild and for a short period of time. Several analysts have had similar opinion that the world is going to face a mild recession for a very short period of time.
Sudden increase in prices of oil in international market and global supply chain crisis as part of COVID-19 pandemic doubled down on both developed and developing economies in the form of high inflation rates. European economies such as Germany and Netherlands witnessed historically high levels of inflation while the United States of America recorded highest inflation in 40 years.
In order to counter the effects of inflation of national economies and to bring down inflation rate to normal, central banks across the globe were forced to increase interest rates in an unprecedented manner. When central bank of a country increases interest rate, it will reduce cash flow in the economy and bring down demands and hence prices of commodities in the market. But increasing interest rate also may cause economic disruption and push economies into a recession which is basically slowdown of the economy. Inability of central banks to bring down high inflation rate through interest rate hikes forced them to increase interest rates in a more aggressive manner.
The survey conducted by KPMG also states that 75% of company heads have already implemented or plan to implement a hiring freeze in next 6 months. More than 80% of CEOs re considering of downsizing their employee base by a large number. This indicates that we can expect large number of lay-offs and termination in the weeks to come which will mount the pressure of labour markets.
Regarding the risks to growth over next 3 years, the number one risk stated by CEOs were disruptive and emerging technologies which seriously changes the landscape of each market and the competition levels. Environmental crisis and climate change also got into the top five risks to growth of businesses in the next 3 years.