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As we emerged from the summer, we found an economy in the midst of a slowdown compared to the significant growth rates recorded in the first half of 2023. In this article we present our outlook.

After almost two years raising interest rates, in 2023 the major central banks reached the peak and adjusted their strategy: instead of raising official rates further, the monetary tightening was going to be implemented by keeping rates at that peak for longer. However, by the autumn the financial markets were already questioning this narrative. Why?

We delve into the REPowerEU plan, approved in May by the European Commission, and its measures to accelerate the energy transition envisaged in the Green Deal and the Fit for 55 package.

With the general government deficit expected to stabilise at around 4.0% of GDP in 2023, the Treasury’s funding needs will remain high. The market will also have to absorb all of the debt held by the ECB that will not be reinvested by the central bank, after it announced a shift in its strategy in December. In this context, it is useful to put into perspective the volume of debt that the market will have to absorb during 2023.

Despite the reduction of the public deficit to around 2.8% of GDP, the Treasury’s funding needs remain high, with a projected net issuance of 60 billion euros. It will also have to deal with the end of reinvestments by the ECB and the impact of interest rates on public debt.