Gloom Deepens Among Executives, Economists at Davos (Update2)

Gloom Deepens Among Executives, Economists at Davos (Update2)
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By Matthew Benjamin and Simon Kennedy

Jan. 28 (Bloomberg) -- Gloom is deepening among business leaders and economists, casting a pall over this year’s World Economic Forum in Davos, Switzerland.

“The crisis is getting worse,” Rupert Murdoch, chief executive officer of News Corp., said at a press conference to kick off the five-day event today. “It’s going to take very drastic action to turn that around, if it can be turned around, quickly. I believe it will take quite a long time.”

Concerns over the economic outlook are virulent as executives from JPMorgan Chase & Co.’s Jamie Dimon to Stephen Green of HSBC Holdings Plc join more than 2,500 counterparts, academics and policy makers in the ski resort for five days of soul-searching and deal-making.

“You have to realize the size of the problem confronting us today is significantly larger than in the ‘30s,” George Soros, the billionaire hedge-fund owner and philanthropist, said today. “The situation will continue to deteriorate.”

Just one in five of 1,124 chief executives in 50 nations said they were very confident about prospects for revenue growth in 2009, down from half last year, and more than a quarter said they were pessimistic, a survey by PricewaterhouseCoopers LLP showed. The sentiment was the worst since the accounting and consulting firm began tracking the CEO outlook in 2003.

The global economy will slow close to a halt this year as more than $2 trillion of bad assets in the U.S. help sink economies from Russia to the U.K., the International Monetary Fund said today.

‘Pretty Grim’

“The outlook is pretty grim,” said Howard Davies, director of the London School of Economics and a former Bank of England policy maker who is in Davos. “Things are not good and business surveys are coming out showing they’re getting even worse.”

What began as a financial meltdown 17 months ago has morphed into an economic calamity unseen since the Great Depression.

In the past year, Lehman Brothers Holdings Inc. and Bear Stearns Cos. have collapsed and officials around the world have committed trillions to prevent more from toppling. The Standard & Poor’s 500 Index is still falling after its worst year since 1937 as the U.S., Japan and Europe sink into their first simultaneous recession since World War II.

World Bank Chief Economist Justin Lin said today the world was in a “protracted recession” and that injecting capital into banks won’t revive it. “We need to have coordinated fiscal stimulus that’s large enough,” he said.

‘Delusional’

It’s “delusional” to expect the U.S. fiscal stimulus plan crafted by President Barack Obama to “jump start” the economy, Stephen Roach, Morgan Stanley Asia’s chairman, told a panel in Davos today.

The executives polled by PricewaterhouseCoopers survey don’t see a turnaround soon.

Only about a third were very confident about growth in the next three years, down from 42 percent last year. Almost seven in 10 said their companies will be affected by the credit crisis, and 70 percent of those said they will delay planned investments as a result.

Just 13 percent of U.S. executives said they were “very confident” about revenue growth in the next 12 months, compared with 36 percent last year, while 15 percent in Western Europe expressed the same sentiment, down from 44 percent. Among developed economies, French executives were the most skittish, with just 5 percent calling themselves very optimistic.

Emerging Markets

Business leaders in emerging markets were more confident. Seven in 10 Indian executives expressed optimism about their company’s growth, as did about three in 10 of those in Brazil, Russia and China.

One further bright spot: Only about a quarter of the business chiefs said they plan to cut payrolls in the coming year, while 35 percent said they intended to maintain staffing levels. That would be welcome news to workers as unemployment accelerates around the world with Home Depot Inc., Caterpillar Inc. and ING Groep NV among those axing positions this week