About 86% of respondents said they expected the EU to be in recession this year
About 86% of global investors expect Europe to enter a recession this year, according to a survey of fund managers conducted by Bank of America and released on Tuesday. This figure represents a significant increase from the previous month, when only 54% of respondents made the same prediction.
However, asset managers’ dismal forecasts are not limited to Europe. A record 79% of respondents with $800 billion in assets under management predict that the entire world economy will weaken throughout the past year. Half of those said the suffering would be severe enough to be classified as a recession.
Among European respondents, 70% said “request destruction“—a situation where skyrocketing prices make individuals and businesses avoid spending their money – will dominate the financial landscape for the next few months. They argue that this will cut inflation – currently at a record 8.6% in the year to June – while encouraging central banks to raise interest rates.
The poll also showed a change of opinion regarding central bankers, who were called by 32% of respondents last month as a major risk to financial markets. This month, only 17% blamed central banks for the continent’s economic unhappiness.
If the European Central Bank continues with its efforts to cut inflation by raising interest rates, it will be the first rate hike in more than 10 years. While some countries – especially the Baltic states with high inflation – have pushed the central bank to raise interest rates by 50 basis points, ECB president Christine Lagarde has hinted that it will move gradually. gradually, raise interest rates by 25 points in July and then raise interest rates. further into September if inflation remains unsustainable.
However, she recently admitted that there are “clearly the conditions in which gradualism would not be appropriate“In which the bank should”more timely accommodation to quell the risk of a complacency spiral.“
Europe’s economic problems began to pile up severely during the self-imposed economic shutdown of the Covid-19 pandemic and have continued to intensify since then, exacerbated by the Ukraine crisis and the sanctions against Russia.