Global Economic Outlook for 2024 [5] How do CFOs see the world in 2024?

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CFO of UBS Europe SE, a major financial services company in Europe, the Middle East and Africa (EMEA) and around the world, what are your thoughts on the global economy in 2024 and the economic outlook for your region? The global economic landscape is complex. In recent years, we have experienced pandemics, military conflicts, geopolitical tensions, high inflation, rising interest rates, and a surge in government debt. 2024 feels like an extraordinary moment in history, and we should be cautious about the outlook for the year. High interest rates will put pressure on private sector spending, while politics and geopolitics will play a very important role. But on a more positive note, technology and AI should continue to accelerate value creation in many industries. Turning to the Europe, Middle East and Africa (EMEA) region, which is complex and diverse, but at the same time dynamic. It will play a reuse role in future technological progress and sustainable development, and will benefit from significant strategic investments in energy and technology.

How will this affect your company? Taking into account various global factors and the specific situation of UBS, the economic outlook for 2024 suggests that the bank will enter a period of adaptation and strategic adjustment. Financial markets remain unpredictable due to central banks pausing interest rate hikes and uncertainty about the optimal level of interest rates needed to achieve their inflation targets. Such an environment will require UBS to exercise caution and balance earnings demand with the risk of a volatile interest rate environment. By 2024, UBS aims to achieve potential profitability, stay close to clients to help them navigate challenging markets, execute integration plans on time while planning for the next milestones, and strengthen our balance sheet at all intervals, including working to adjust the cost base. For our clients, UBS will focus on managing liquidity, investing in high-quality assets, strategically trading currencies and commodities, hedging market risk, and diversifying through alternative investments based on our investor recommendations.

What are the risks and other key challenges facing your company in 2024 and beyond? The integration process with Credit Suisse is risky, but it also offers valuable opportunities for transformation and growth. We anticipate that this merger will streamline processes, optimize resources, and ultimately enhance the customer experience and products." The new integrated service platform unifies expertise in strategic alignment and robust risk management, and will strengthen UBS's position as a global financial leader. In 2024 and beyond, UBS will move forward in an environment full of opportunities and challenges. The uncertain interest rate environment and the shift in monetary policy provide a unique opportunity for UBS to demonstrate our adaptability and expertise in asset valuation and market volatility management, with the potential to improve profitability and refine our investment strategy. Geopolitical developments, while challenging, also provide an opportunity to strengthen our investment management and client advisory services to demonstrate UBS's resilience and strategic foresight in dynamic market conditions.

What are your thoughts on the global economy in 2024 and the economic outlook for your region?

The world is going through extraordinary challenges. I believe that the global economy in 2024 will be characterized by (i) "chronically higher" interest rates, (ii) slow growth, and (iii) increased volatility and uncertainty. Despite the challenging global situation, I believe ASEAN has performed relatively well, continuing its positive trajectory in recent decades and benefiting from the "China+1" strategies of various companies. However, given the specificities of each country, ASEAN is not homogeneous. Singapore should be the standout performer in the group.

How will this affect your company? Like other companies, we have had to deal with increasing cost pressures, labor shortages, and rising interest rates. Our industry is capital intensive, and rising interest rates can increase refinancing costs for our clients, affect the viability of new investments, and increase pressure on investors. Despite the challenging global environment, we delivered strong revenue and profit growth in the last fiscal year and continued to strengthen our balance sheet. A strong balance sheet has lowered borrowing costs and better terms from suppliers, allowing us to seize opportunities in the face of challenges. We remain optimistic about the business outlook and expect customer demand for our heavy lifting and transportation solutions to remain stable in Singapore and key regional markets such as India, Saudi Arabia and Thailand. We believe there are other opportunities for Saudi Arabia as it embarks on a modernization program to diversify beyond the oil sector.

What are the risks and other key challenges facing your company in 2024 and beyond? We remain vigilant and attentive to risks, especially in the areas of contracts, credit, foreign exchange, geopolitics, etc. We must also continue to leverage technology to deliver better solutions to our customers safely, efficiently and profitably. In terms of sustainability, we continue to strive to minimize our carbon footprint. One of our yards has been "carbon negative", and we have also purchased electric pallet trucks and forklifts. In our recently released Sustainability Report 2023, we have also adopted the GRI 2021 standard, as well as the TCFD's recommendations on governance, strategy, risk management, metrics and targets, in which we set out our ESG goals, as well as climate risks and opportunities. In terms of sustainability reporting, we are keeping a close eye on areas that are growing fast.

What are your thoughts on the global economy in 2024 and the economic outlook for your region? Looking at the markets in which we operate, we see strong demand for high-quality health and nutrition products in China and expect our adult and pet products to continue to grow. But declining birth rates are a challenge for our baby products. We are very optimistic about the growth of the U.S. market and are very confident that we will be able to outperform the market through product innovation and sales channel expansion. As for Australia and New Zealand, if global demand for commodities is not as strong, Australia's economic recovery may not be as fast as we would like. However, consumer demand for health supplements is very strong and tourists are returning to Australia. As a result, we expect modest growth in 2024. As for other markets, we expect Southeast Asia to continue its strong expansion with strong economic growth and rising living standards. We're also expanding in India and the Middle East, where we're seeing pretty strong demand. Finally, despite the economic challenges, we expect our European business to remain stable in 2024.

How will this affect your company? In terms of human resource management, we will invest some in high-growth markets such as Southeast Asia and the United States, but in general, we will drive operational efficiency. For example, we are harmonizing enterprise resource planning systems in most markets. We will also continue to drive the development of our corporate culture, which we believe is important.

What are the risks and other key challenges facing your company in 2024 and beyond? The first risk is the demographic structure of declining birth rates. And then there's supply chain risk, because we operate on all of these continents and have very complex global supply chains. Another challenge we have just encountered is the drastic reduction in fish stocks and the global supply of fish oil due to global warming and the El Niño effect. We have seen double-digit growth in the cost of fish oil we purchase. At the same time, an important trend in the future of the nutrition and health industry is expected to be "personalization", taking into account different diets and DNA. Technologies, including artificial intelligence, will help us develop personalized nutrition solutions. Stay tuned for the next installment.