CIO Insights Resilience versus recession If inflation rates continue to decline and there is no need for robust Fed intervention, the U.S. economy could return to growth in the second half of 2023, finishing the year overall at +0.4%. Economic momentum in China is likely to be much stronger next year. We are expecting growth of around 5% in 2023 after an estimated 3.3% this year. Long-term economic growth potential depends on the production factors of labour, capital and technological innovation. The importance of technology has been underlined by the global shortage of skilled labour and the need to make more efficient use of resources. Productivity growth has declined considerably in recent decades, especially in developed markets, with a correspondingly negative impact on potential growth. Figure 2: Quarterly growth profiles for the U.S. and Eurozone Source: Deutsche Bank AG. Data as of November 11, 2022. % U.S. GDP QoQ Eurozone GDP QoQ % 2022 2023 2022 2023 0.8 0.8 0.6 0.6 0.4 0.4 0.2 0.2 0.0 0.0 -0.2 -0.2 -0.4 -0.4 -0.6 -0.6 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 U.S. GDP QoQ Eurozone GDP QoQ In the long term, increased productivity will be needed to ensure stronger economic growth. Innovative technologies are the key to this – and are thus the guarantors of the future “wealth of nations”. Economies are already taking action to counter this. In developed markets, there is a clear focus on increasing productivity in the service sector, which employs up to 80% of the workforce. Key technologies include cloud services, artificial intelligence and digitalisation in general. Increasing automation in the industrial sector also can raise productivity, especially in the emerging economies. Technological productivity will be boosted by economies of scale – by the growing market penetration of renewable energy and battery technologies, for example. In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved. Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Performance refers to a nominal value based on price gains/losses and does not take into account inflation. Inflation will have a negative impact on the purchasing power of this nominal monetary value. Depending on the current level of inflation, this may lead to a real loss in value, even if the nominal performance of the investment is positive. Investments come with risk. The value of an investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk. This document was produced in December 2022. 5