Confidence among leaders of the world's top companies meeting in Davos has nosedived to a new low, with recession and a worsening credit crisis torpedoing faith in corporate prospects.
The findings from a poll of more than 1,100 CEOs sets a grim backdrop to a four-day meeting of the world's business and political elite which opens on Wednesday in the Swiss ski resort.
Bankers are thin on the ground this year but policymakers will work behind the scenes ahead of a summit of the G20 group of big and emerging countries in April and a G8 summit in July. Russian Prime Minister Vladimir Putin and Chinese Premier Wen Jiabao will both address the meeting later on Wednesday.
The annual PricewaterhouseCoopers (PwC) survey suggests the need for action is urgent, as a crisis that started in the banking system takes a growing toll on revenues, profits, expansion plans and jobs across all regions and industries.
Worldwide, just 21 percent of CEOs said they were very confident of growing revenue in the next 12 months, down from 50 percent a year ago.
And hopes for a short "V"-shaped recession appear to have evaporated with most business leaders expecting no more than a slow and gradual recovery over the next three years.
"The three-year view is a bit better but the bad news is it is not that much better. Compared to the 21 percent confidence over the next 12 months, it's only 34 percent over three years," said Tony Poulter, global head of consulting at PwC.
"The message is: there is a long term but we are not going to see it dawning immediately."
Stephen Roach, Morgan Stanley's Asia chairman, agreed the next three years would be very tough.
"We have to face up to the fact that the recovery, when it comes, later this year or early next year, is going to be anaemic," he told Reuters.
"The concept of a vigorous 'V'-shaped recovery is for business cycles of the past but not for this post-bubble, post-crisis business cycle. It is going to be a long slog in 2010, in 2011."
LEHMAN FALLOUT
PwC's Poulter said the situation had deteriorated significantly since September, following the collapse of Lehman Brothers and sale of Merrill Lynch.
Back in September, only 46 percent of business leaders interviewed thought the banking crisis would affect them but by December that had risen to 67 percent.
Worryingly, even this gloomy picture — with confidence the lowest in the survey's seven-year history — may be over-optimistic, given the slew of further bad news since it was completed in early December.
More than 70,000 job cuts were announced on Monday this week alone, with Caterpillar Inc axing 20,000 after the heavy equipment said it had "pretty much hit a wall in December".
In contrast to last year, corporations based in previously hot emerging markets were equally gloomy, a fact which PwC said had exposed the idea of the "decoupling" of developed and developing world markets as a myth.
The Washington-based Institute for International Finance, a grouping of the world's biggest banks, said on Tuesday it expects private capital flows to emerging markets to drop by nearly two-thirds to $165 billion this year.
Not surprisingly, the sharp downturn means some of the issues that caused headaches in boardrooms in the past are no longer such a big issue.
Last September, the scarcity of natural resources still troubled one in five CEOs; by December this had more than halved to less than one in 10.
