The suspension of gas imports from Russia has added to the energy woes of the Western Europe region and has further fueled a sharp increase in energy prices. While governments have managed to secure gas
inventories and implemented measures to cap energy price increases, energy rationing in selected
sectors remains likely. The region is expected to experience a recession starting in Q4 2022, which will
extend through H1 2023, and will be followed by a weak and gradual recovery. The war in Ukraine and
China’s zero-COVID policy will continue to be a source of significant supply chain disruption and weigh
on the Western Europe industrial output.

Germany and the UK are likely to see full-year contractions in 2023, as elevated inflationary pressures
and a drop in exports continue to weigh on overall performance. Southern European markets continue
to appear more resilient and will see a more pronounced rebound, especially as the tourism sector
makes a more significant recovery in mid-2023.

Global risks to the outlook continue to increase, but access to Russian gas supplies remains the biggest risk to Europe. Our base case is Gazprom permanently reducing gas inflows to the EU and introducing further cuts, prompting gas rationing over the winter months.

Download an Executive Summary of the Western Europe Outlook for 2023

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