Citigroup CEO Jane Fraser has told CNBC she believes Europe is heading into a recession.
Speaking at World Economic Forum Second, Fraser says that a combination of factors, including the war in Ukraine and the energy crisis, have left Europe vulnerable to a significant recession even as other parts of the world experience some signs of recovery.
“Europe is right in the middle of storms from the supply chain, from the energy crisis, and obviously only close to some atrocities happening in Ukraine,” she said. Geoff Cutmore.
When asked if those factors led her to believe Europe would experience a recession, Fraser said: “Yes.”
Europe’s energy costs have skyrocketed in recent months due to Russian sanctions, while widespread inflation is fueling a cost-of-living crisis.
The head of Wall Street did not give a timeline for the downturn. However, her October 2021 prediction of a “brutal winter” for the markets proved to be largely correct, with the stock market initiating a massive sell-off in early 2022 with losses lingering to this day.
The US, which has so far demonstrated “more resilience” in its economy, labor market and consumers, can still weather the downturn, Fraser said. Much depends, however, on how the Federal Reserve implements its strategy of raising interest rates as inflation soars ever higher.
“There’s some buffer there,” she said. “To see if it’s used wisely.”
Meanwhile, Asia is recovering well from the Covid-19 pandemic, and exhibiting “optimism”, she said.
Jane Fraser, CEO of Citi, said she believes Europe will fall into recession as it faces the impact of the war in Ukraine and the aftermath of the energy crisis.
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Fraser was speaking at a panel called “Global Economic Outlook”, in which she was joined by Francois Villeroy de Galhau, Governor of the Bank of France and a Bank of China policymaker central Europe.
Villeroy de Galhau said he would “disagree” with Fraser’s prognosis for the European economy, describing it instead as “resilient”.
“The main problem, at least in the short term, is inflation,” he said. “This is why we have to normalize monetary policy.”
The ECB on Friday gave its strongest indication yet that it will soon start raising interest rates – potentially in July – with market players now pointing to at least four rate hikes before the end of the year.
The ECB has long resisted rate hikes, insisting that Price pressure will decrease in the second half of the year.
Euro zone inflation hits record high for sixth straight month in April as War going on in Ukraine and the subsequent impact on Europe’s energy supplies weighed heavily on the region’s economy.
