• Although some upside surprise may come from a stronger-than-expected Q4, we keep seeing significant growth deceleration unfolding, driven by weakening domestic demand and global growth. Growth will remain significantly below potential on average in 2023-24, with particular weakness in H2 2023, implying heightened recession risks. Inflation seems to have peaked and have moved to a lower monthly regime, yet we expect stickiness in underlying inflation, with the core index declining more slowly than the headline one.
• Eurozone: We upgraded our Eurozone growth outlook. While we still expect weakness and activity contraction over winter, we expect it to be less profound than previously feared. Notwithstanding the modest upward revision, headwinds for the Eurozone economy remain significant. Over the spring-summer period we expect some growth recovery, even if modest at this stage, helped by decelerating inflation and improved sentiment. Tighter monetary policy will represent a clear headwind, keeping growth below potential in 2023-24. Risks related to the energy crisis seem to have receded, but remain prominent for both the inflation and growth outlook.

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