20 Chief Economists Outlook 3. Business in the new landscape Expectations of rough terrain As the world puts another tumultuous year behind it, chief economists were asked for their views about some of the likely headwinds that businesses in particular are going to face in 2023 (see Figure 12). They were also asked about the most effective responses to these headwinds and sources of optimism, which are addressed in the next section. Among the headwinds, weak demand, higher interest rates and higher input costs stand out. Nine out of ten respondents expect weak demand to exert a significant drag on business activity this year, and almost the same proportion (87%) expect the same of elevated borrowing costs. Over 60% expect higher input costs to exert a significant drag. The start of 2023 represents the triple challenge of continued relatively high prices of key inputs meeting tightening monetary policy and weakening demand. Figure 12. Challenges to business activity Which of the factors below are likely to exert a significant drag on business activity in 2023? Share of respondents (%) Regulatory and policy uncertainty Supply chain disruptions Talent shortages High input costs High cost of borrowing Weak demand Extremely unlikely Somewhat unlikely Neither likely nor unlikely Somewhat likely Extremely likely 9 14 18 5 18 5 45 27 18 5 45 27 9 50 36 9 18 50 14 55 32 64 27 Source: Chief Economists Survey, December 2022