The heads of several large European companies believe that a significant recession in Europe is coming. About it writes CNBC.

The continent is particularly vulnerable to the effects of the conflict in Ukraine, in particular, economic sanctions and energy supply problems, and economists have lowered growth forecasts for the eurozone in recent weeks.

The eurozone is facing parallel economic shocks from the conflict in Ukraine and a surge in food and energy prices, as well as a supply shock from China’s zero-tolerance policy for the coronavirus. That has raised concerns about “stagflation” – an environment of low economic growth and high inflation – and a possible recession down the road.

“Of course, we see a major recession looming, but it is only in the process of forming. There is still excessive demand because of the coronavirus crisis, which we are just about to overcome,” said Stefan Hartung, CEO of German engineering and technology giant Bosch.

“The crisis is still here, and you see it hitting us hard in China, but in many parts of the world consumer demand has already even increased in some areas.”

In particular, Hartung noted continued consumer demand for appliances, power tools and vehicles, but suggested that it will disappear.

“What that means is that for a period of time that demand will still be there, even though we see interest rates going up and we see prices going up, but at some point it’s not just going to be a supply crisis but a demand crisis. Then, of course, we will be in a deep recession,” he added.

Inflation in the eurozone hit a record high of 7.5 percent in March. So far, the European Central Bank has remained more dovish than its peers such as the Bank of England and the US Federal Reserve, which have begun raising interest rates in an attempt to curb inflation.

Nevertheless, the ECB now expects to complete net asset purchases under its APP (Asset Purchase Program) in the third quarter, after which it will have the option to start tightening monetary policy depending on the economic outlook.

Holger Schmieding, chief economist at Berenberg Bank, said in a note on Friday that near-term risks to economic growth in Europe have shifted to the downside.

“A stronger quarantine in China and cautious consumer spending in response to high energy and food prices could easily trigger a temporary contraction in euro area GDP in the second quarter,” Schmieding said.

“An immediate embargo on gas imports from Russia (highly unlikely) could turn this into a more serious recession. If the Fed is wrong and catapults the U.S. straight from boom to bust (otherwise, but not entirely impossible), such a recession could last well into next year.”

Nonetheless, Schmieding suggested that the eurozone would probably only enter a recession “in the worst case scenario” and that this is not a baseline expectation.

Mark Branson, president of German financial regulator BaFin, said any escalation in Ukraine or further power outages could pose serious risks to growth in Europe’s largest economy, with industrial sectors particularly vulnerable.

“We are already seeing growth fall to around zero in many jurisdictions, including here. Vulnerability is also driven by the ongoing Covid-related shocks,” he said.

“We have inflation to contend with and we have inflation to contend with now, so it’s a complex combination of factors for the economy.”

Ola Kallenius, CEO of Mercedes-Benz, also told CNBC last week that the situation in China and the conflict in Ukraine are creating a “challenging business environment” for the German luxury carmaker on three fronts.

“On the one hand, we have ongoing shortages, mainly related to semiconductors. In addition, there are now new lockdowns in China, our largest market, which will affect us but could also affect supply chains around the world, and on top of that, of course, there is the conflict in Ukraine, so the business environment is challenging,” he explained.

His comments were echoed by Volkswagen CEO Herbert Diess, who said the company also faced a “contentious environment” due to Covid, chip shortages and the conflict in Ukraine in the first quarter.

Maersk CEO Soren Skou said the world’s largest shipping company was also watching recession risks, particularly in the United States, but did not expect them to come to the fore until late 2022 or early 2023.