from the second quarter of 2023 onwards. the overall weakness in economic activity would reflect both that of consumption, which would decrease as a result of the decline in households'purchasing power, and that of investment in machinery and equipment, which would slow down owing to the uncertainty and the increase in financing costs. worsening international trade would also play a role. 1 / 9 bis - central bankers'speeches the second, more adverse scenario assumes a complete halt in russian gas flows to europe starting from the current quarter and significantly higher energy commodity prices. at the same time, international trade would slow down more markedly. in this case, gdp would contract by 1. 5 per cent in 2023 and inflation would exceed 9 per cent, about 2. 5 percentage points higher than in the first scenario. in light of the current challenging environment, the point estimates of these two scenarios are purely indicative and strongly dependant on the assumptions made on commodity prices and availability, which largely depend on developments in the conflict in ukraine. in any case, the risks to growth are tilted to the downside and, not only for italy, depend on geopolitical tensions and the economic outlook in the united states, where, also owing to the strong tightening of monetary conditions, many indicators anticipate a possible gdp contraction in the coming months. further negative repercussions could arise from a possible abrupt slowdown in the chinese economy, mainly in connection with the fragility of the construction sector, and from inflation remaining persistently high for longer than currently expected. inflation in the euro area came close to 10 per cent in september, mainly driven by the exceptional rise in energy prices ( over 40 per cent year - on - year ). inflation reached 4. 8 per cent net of the most volatile components – energy and food – which are the most affected by the conflict in ukraine. almost two thirds of the overall increase in consumer prices over the past twelve months appear to have been caused by the increases in energy prices, both directly and through the impact on production costs. this share rises to around four fifths if we factor in the impact of food prices which, although not energy - related, have also been affected by the conflict in ukraine. according to the european central bank ( ecb ) staff projections published in september, consumer prices in the euro area will grow by over 8 per cent on average in 2022 before gradually decreasing to below 6 per cent in 2023 and converging to levels close to the 2 per

they threaten to weaken banks ’ capitalization, their capacity to finance the recovery of the real economy. in the 1990s the rebound in bank profitability came about principally through an expansion of income, with only modest interventions on costs ( figure 8 ). 5 in the present circumstances, an increase in revenues appears unlikely considering the stagnation in lending, narrow profit margins, the downward trend of asset management and the penalization of trading activity implicit in the new capital rules. overall, the italian banking system seems to have an excess of capacity, which drives down the overall volume of business. in the short term, therefore, raising profitability requires energetic action on the cost side, with an unflinching review of the combination of production factors and distribution channels. while the demand for banking services has grown slowly in the last twenty years, the number of bank branches has nearly doubled. gauged against the euro - area average, it is excessive in relation both to total bank assets ( €111 million per branch in italy against €170 million in the euro area ) and to the volume of loans ( €59 million against €67 million ). 6 until the start of the financial crisis, the increase in the number of branches went together with an expansion of virtual distribution channels ( figure 9 ), rapidly growing investment in information and communication technology ( ict ) ( figure 10 ) and stable staff size. the crisis has only attenuated these trends. the use of technology and remote distribution has thus largely overlapped, not replaced, the utilization of labour and the traditional branch network. the cost - income ratio has not come down ; on the contrary, up to 2011 it increased. massive recourse to ict can reverse these trends through synergistic use of the different distribution channels ( branches, telephone, call centres, atms and the internet ), according to the practices followed by the intermediaries that have become international success stories. remote channels can be used for the distribution of highly standardized, low - valueadded transaction - based services, such as liquidity management and consumer finance products, especially to the more technologically or financially advanced customers. this would permit the drastic pruning of the traditional distribution network and would free up the resources needed to strengthen the remaining branches, focusing their activity on more complex or advisory - intensive products, such as corporate banking, mortgage lending and wealth management, that can generate more value added and reinforce customers ’ preference for one - stop shopping. recent analyses