1、We maintain our l ong-hel d view that the energy crisis wil l push the Europeanneconomy into recession this winter,as surveys and production data point to asizeabl e sl owing in energy-intensive industries,and high inflation wil l reduce realhousehol d incomes.But we now see a shal l ower recession

2、as the hard datahave remained surprisingl y resil ient,the rebal ancing of the gas market hasreduced the risk of energy rationing and governments have provided significantfiscal support.We forecast that the Euro area economy wil l contract by onl y0.7%from 2022Q4 to 2023Q2(vs 1.1%before).That said,E

3、uropes gas suppl y situation remains fragil e,fiscal pol icy wil l probabl ynsl ow growth in 2023-24 as the energy support winds down,and the gas crisis isl ikel y to l eave substantial suppl y-side damage.We therefore see a mutedrecovery and shave our growth forecasts for 2023H2 and 2024Q1.We now l

4、 ookfor area-wide growth of-0.1%for 2023 and 1.4%for 2024,cl ose to consensusover the next two quarters but sl ightl y bel ow for the remainder of 2023 and earl y2024.Looking across countries,we expect Germany and Ital y to be more affected bynthe energy crisis than France and Spain.Rising sovereign

5、 yiel ds,high debt andweak growth l eave Ital ys new government on a narrow fiscal path,highl ightingmedium-run fiscal vul nerabil ities.The French government struggl ed to buil d amajority around its 2023 budget and pol itical uncertainty(incl uding the chance ofearl y el ections)remains.Al though

6、gas prices have fal l en significantl y,we expect Euro area inflation tonpeak in December given continued energy pass-through and strong underl yingmomentum.Core inflation is l ikel y to ease gradual l y over 2023 as goods priceinflation cool s,but we see sticky services inflation due to continued l