• We foresee increased recession risks in H2 2023, when we project the weakest growth trend, weakest composition of domestic demand, and heightened recession risks. While inflation seems to have peaked, stickiness in inflation may remain a key feature in the months to come, with core inflation declining slowly and remaining above target.
• Eurozone: GDP surprised to the upside in Q3, lifting carry-over growth for 2022. Nonetheless, we expect GDP to contract in Q4 2022-Q1 2023, followed by some weak recovery helped by receding inflation providing relief to the consumer (inflation will be the main recession driver). 2023 average dynamics will be weaker than previously expected, feeding into somewhat weaker 2023-24 projected growth. We upgraded our expectations for inflation at end-2022 / early-2023 due to firm momentum and broad-based inflationary pressures. Risks related to the energy component remain prominent for both the inflation and growth outlook.

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