Opportunities on the Horizon: Investing Through a Slowing Economy

Regional previews | WEALTH OUTLOOK 2023 | MID-YEAR EDITION | 65 6.2 Europe: Selective opportunities amid modest growth GUILLAUMEMENUET Head of Europe, Middle East and Africa Investment Strategy and Economics Both Europe and the UK are exceedingmodest expectations as GDP growth and equity valuations appear more attractive. Europe has avoided a recession as a rapid drop in energy prices offset its war-related trade shocks. Continued tightness in labor markets also buoyed markets. We expect 2023 real GDP growth to average 0.8% year-on-year in the euro area and 0.3% year-on-year in the UK. One of the key risks to economic activity will be higher interest rates and stricter bank lending standards following aggressive central bank tightening. Although policy rates will likely peak in mid-year 2023, we expect that there will be some drag on investment and hiring plans, dampening domestic demand.