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Majority of Singapore CEOs believe that a recession is likely to impact their earnings over the next year: KPMG

CEOs in Singapore are less optimistic than their global peers on whether the recession will be a mild and short one or not.

About 86% of global CEOs indicate that they are anticipating a recession to hit the global economy in the next 12 months, according to the KPMG 2022 CEO Outlook, which asked over 1,300 CEOs about their strategies and outlook.

Of the Singapore CEOs polled, about four in five – or 80% – of them are anticipating a recession to impact up to 10% of their expected earnings. This is compared to 71% of global CEOs feeling the same.

Ahead of anticipating a recession, 88% of Singapore CEOs have embarked on or are planning to conduct a hiring freeze over the next six months. About 92% of Singapore CEOs have also taken or planned other steps such as diversifying their supply chain, says KPMG.

CEOs confident in the economy’s growth prospects over the next three years

Looking further ahead, however, Singapore CEOs are more optimistic than their global peers with 92% expecting to increase their headcount by up to 10% in the next three years. The remaining 8% believe that their headcount will remain the same.

Globally, 21% of CEOs expect to have the same headcount or a further reduced one in the next three years.

Despite anticipating a recession to hit within the next year, about 71% of the global CEOs polled indicated that they are confident in the growth prospects of the global economy over the next three years. According to KPMG, this is the highest number of CEOs to express their confidence since the start of the Covid-19 pandemic in early 2020.

In Singapore, CEOs are slightly more optimistic than their global peers at 72%.

Yet more CEOs around the globe are confident that the global economy in the next six months will “remain resilient” at 73%, 13 percentage points higher than the 60% since early 2022. This indicates that CEOs around the world are looking towards the future and seeing opportunity in uncertainty.

Singapore CEOs less optimistic than global CEOs on whether recession will be mild and short or not

Despite the possibility of a recession looming, 58% of CEOs globally anticipate that the recession will be “mild and short”. Of the 1,300 CEOs polled, 75% of them are expecting to see further disruptions to their businesses that may make it difficult for these companies to rebound from the pandemic.

CEOs in Singapore are less optimistic than their global peers with only 32% anticipating that the recession will be a mild and short one. However, they are far more optimistic compared to their global peers with 44% of them saying that a recession would upend their anticipated growth over the next three years.

Singapore CEOs are still expecting to see their company’s earnings grow over the next three years. However, they have also reined in their expectations with 60% suggesting an earnings outlook of up to 4.99% per annum (p.a.) over the next three years.

CEOs still keen on M&As

Despite economic concerns, 85% of global CEOs and 84% of Singapore CEOs are still having moderate to high appetites for mergers and acquisitions (M&A). According to KPMG, innovation will be “key” for companies to remain competitive with higher interest rates and borrowing costs.

“CEOs are also concerned that deal makers may be taking a much sharper pencil to the numbers and focus on value creation to unlock and track deal value, every step of the way,” says KPMG.

In 2022, 68% of Singapore CEOs polled say that the global minimum tax regime is of “significant concern” to their organisation’s growth, down from the 80% seen in 2021, showing that they are feeing less anxious about the upcoming implementation of the regulations.

The implementation timeline of the global tax rules and expectations has been delayed to 2024.

“These sentiments have also had a positive impact on the way they view public reporting of their global tax contributions, with only 56% of those in Singapore indicating that they feel greater pressure to increase reporting, a 32-percentage point drop from the 88% in 2021 and far lower than the 74% of CEOs globally,” says KPMG.

Cyber security no longer companies’ biggest threat

Cyber security is no longer seen as one of the top five risks to growth with only 6% of CEOs globally naming it as their top risk.

In Singapore, cyber security concerns are also among the lowest concerns with 4% of CEOs naming it as their top risk. On the other hand, rising economic concerns, interest rate and regulatory risks have emerged as among the key threats to growth for CEOs in Singapore (16% each), says KPMG.

However, the cyber environment continues to evolve with 77% of CEOs globally and 60% of CEOS in Singapore saying that their organisation views information security as a strategic function and as a potential source of competitive advantage. Nearly three-quarters of organisations (72%) in Singapore are also confident in their preparedness against a cyber-attack, higher than the 69% in Asia Pacific and 56% globally.

Reputational risks and economic pressures top concerns for Singapore CEOs

Among the list of concerns faced by business leaders, reputation risk ranks as the top concern with 20% of Singapore CEOs concerned about the broader scrutiny by their customers and the public in relation to the company’s corporate purpose and environmental, social and governance (ESG) accountability among other factors.

Economic factors were the second highest concern with 16% of Singapore CEOs concerned with the rising interest rates, inflation and the possibility of a recession.

Pandemic fatigue, emerging and, or disruptive technologies as well as regulatory concerns tied for the third highest concern among Singapore CEOs at 12% each.

In contrast, pandemic fatigue (15%), economic factors (14%) and emerging and, or disruptive technologies (11%) were the top three concerns among global CEOs.

“The findings from the KPMG 2022 CEO Outlook show that CEOs worldwide are displaying greater confidence, grit and tenacity in riding out the short-term economic impacts to their businesses – as seen in their rising confidence in the global economy and their optimism over a three-year horizon,” says Ong Pang Thye, managing partner, KPMG in Singapore.

“Compared to previous years, CEOs now feel better prepared to weather short-term challenges with resiliency measures such as boosting productivity, managing costs and reconsidering digital transformation strategies to manage impacts,” he adds. “We are also seeing many positioning for long-term growth, such as in Singapore where about 80% of CEOs have indicated that their corporate purpose will have the greatest impact in building customer relationships over the next three years.”

“Once-in-a-generation issues — a global pandemic, geopolitical tensions, inflationary pressures and financial difficulties — have come in short succession and taken a toll on the optimism of global CEOs. While it’s unsurprising the economic climate is now a top concern for business leaders, it’s reassuring to see high levels of confidence among executives in their own companies and their longer-term prospects for growth,” says Bill Thomas, global chairman and CEO, KPMG.

Thomas adds: “The events of recent years have created real turbulence for the business community. Our findings should provide some cautious optimism that, in contending with and overcoming these ordeals, executives are more confident in their companies’ resilience and are focused on mitigating some of the very real uncertainties we face today.”

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