Eurozone 2023 themes – Energy to dictate macro outlook again

The energy crisis will shape the macroeconomic outlook again in 2023, keeping the eurozone economy in recession at the start of the year and leading to a full-year contraction in GDP. We expect a gradual recovery once the energy emergency eases, as declining inflation should allow household real incomes recover. But energy rationing will be a key risk to the outlook if Europe fails to secure enough gas or adjust its demand ahead of the 2023 winter.

What you will learn:

• The recovery after winter will be driven by domestic demand. Resilient labour markets and a rise in real incomes will allow consumer spending to grow modestly in H2 2023.
• A strong increase in projects financed by NGEU funds will boost investment despite the negative macro environment.
• Industry will suffer the brunt of the crisis. But high backlogs will support activity in non-energy intensive sectors, while progress in fuel switching by energy-intensive firms should ease the pain from the required cuts in gas usage.