Allianz Research Executive Summary Ludovic Subran, Chief Economist Since our last quarterly economic update in September, the deteriorating [email protected] energy crisis and a challenging policy mix have confirmed our forecast of Ana Boata, slowing growth, sticky inflation and rising interest rates. For next year, we have Head of Economic Research identified eight songs and themes to keep your ear to the ground during the [email protected] great energy quarantine: Andreas Jobst, Head of Macroeconomic and Capital #1. Slow Down. In 2023, we continue to forecast a mild recession in Europe on Markets Research [email protected] the back of the energy crisis, and in the US due to the abrupt normalization of monetary and financial conditions. This triaging recession will test resilience. Eric Barthalon, Stronger balance sheets, demand backlog, and fiscal support will help limit Head of Capital Markets Research the damage. In the emerging world, growth is expected to remain stable in [email protected] 2023. In 2024, we anticipate a recovery in the US while the eurozone could be Jordi Basco Carrera, stuck in a muddle-through scenario because of the energy stop-and-go. Lead Investment Strategist [email protected] #2. Cold Heart. The energy gap will continue to pose concerns in Europe. After Maxime Darmet, record gas storage and energy efficiency gains helped avoid a blackout Senior Economist for France and US scenario in 2022, prospects for next winter (2023-2024) are limited as [email protected] substitution to Russian gas imports will not suffice. Uncertain gas supply will Pablo Espinosa-Uriel, create negative confidence effects and put the region’s fiscal capabilities Investment Strategist to the test to cushion the impact of high electricity prices on firms and [email protected] households. It will also compel policymakers to find ways to enhance energy Françoise Huang, efficiency and stabilize gas consumption beyond near term savings, together. Senior Economist for APAC and Trade The alternative is a repeat of 2012 and a risk of fragmentation in Europe. [email protected] Ano Kuhanathan, #3. Bad Blood. (Geo)politics made a bursting comeback at the forefront Head of Corporate Research of concerns. From a split Congress and a noticeable return to good ‘ole [email protected] protectionism through the Inflation Reduction Act (IRA) in the US, to Europe’s Roberta Fortes, red herring policies to the negative competitiveness shock stemming from Economist for Latin America the energy crisis (sovereignty, re-industrialization), to China’s balancing act to [email protected] exit zero-Covid, and the many important elections upcoming , investors and Maxime Lemerle, corporates will have to play coping strategies and buffers. Lead Advisor Insolvency Research [email protected] #4. Dragon Attack. The shift in China’s containment measures will alleviate Maddalena Martini, pressures on a slowing global trade, and accelerate the decline of producer Economist for Italy & Greece prices. The domestic post-Covid rebound could start to be felt in the second [email protected] half of 2023, and into 2024 as we expect sanitary restrictions to be eased Manfred Stamer, in spring 2023. A faster easing would benefit the global economy while any Senior Economist for Emerging Europe setback could weigh on global trade and delay the easing of inflationary and the Middle East [email protected] pressures. Katharina Utermöhl, Senior Economist for Europe [email protected] 2