We foresee increased recession risks in H2 2023, when we project stagnant growth and very weak composition of domestic demand, implying heightened recession risks. While inflation seems to have peaked, stickiness in underlying inflation may remain a key feature in the months to come, with core inflation declining slowly and remaining above target.

• Eurozone: we expect Eurozone GDP to contract in Q4 2022-Q1 2023 under the drag of the cost-of-living crisis, followed by a modest recovery over the spring-summer period, as decelerating inflation should start providing some relief to consumers, although still significantly above the ECB target. Tighter monetary policy will represent an headwind too. 2023 average dynamics will be weaker than previously expected, feeding into below potential growth in 2023-24. Risks related to the energy component remain prominent for both the inflation and growth outlook.

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