the economic and inflation outlook in europe as well as about our latest monetary policy decisions. 1 / 7 bis - central bankers'speeches 2. the macroeconomic environment last year, the euro are saw an expansion of 3. 5 % in economic activity. the main factor behind the economic expansion in europe was the lifting of covid - related restrictions. however, high inflation dampened private consumption. this was, to some extent, due to the energy crisis caused by the russian war of aggression against ukraine. initially, during the late summer, there were deep concerns that a cut in the russian energy supply would cause a severe recession, at least in some euro area countries. fortunately, european countries and germany in particular made considerable progress in finding alternative gas suppliers and in filling gas storage facilities before the winter. thus, the most negative scenario was avoided. nevertheless, the energy crisis provoked not only surging energy retail prices and higher production costs for firms. it also created considerable uncertainty and made production planning for firms more difficult, especially for those with high energy consumption. these dampening factors had an effect in the second half of the year especially, while the growth effects of the lifting of covid restrictions petered out. for this winter, we expect economic activity in the euro area to increase marginally. according to the ecb's economic projections published last week, gdp in the euro area will grow only by 1 % this year. it should be taken into account though, that the current financial market tensions imply greater uncertainty around projected figures. one of the most striking economic features of the recent past is the comeback of high inflation. to be fair, the high inflation did not emerge only because of the energy crisis caused by the war in ukraine. the inflation rate had already accelerated in the summer of 2021. as the world recovered from the unprecedented economic slump caused by the pandemic, supply chains were under stress. together with expansive monetary and fiscal policies, the rapid recovery pushed up energy prices. moreover, demand for certain goods and services increased strongly. supply bottlenecks and price increases were the result. with the russian invasion of ukraine in february 2022, energy prices skyrocketed. furthermore, the war and its consequences disrupted some other supply chains. in particular, the energy price shock heated up inflation even more. the figures clearly demonstrate how exceptional last year was. according to the imf, 2022 consumer prices in advanced economies rose by 7. 3 %. that was the highest increase in almost

, in particular, should be beneficial. also, in japan the recession seems to have bottomed out. a recovery of the world economy from its recession was by no means a foregone conclusion. nevertheless, the remarkable stabilisation points to strong underlying resilience, fostered by increasingly flexible markets and by timely policy responses. however, the mild recession has not managed to purge all of the excesses accumulated during the previous expansion. the recovery is currently accompanied by several ongoing adjustment processes, with disequilibria that built up throughout the 1990s still being corrected. most visible and much commented on are the marked declines in the stock markets, which have lost further ground worldwide over the past couple of days. moreover, the us dollar has depreciated against other major currencies, thus facilitating the necessary adjustment of the large us current account deficit. equally, the reduced inflow of capital into emerging market economies should be seen as part of the correction of unsustainable trends. this applies also to fdi. particularly in latin america, the earlier high fdi inflows were in large measure attributable to privatisations of utilities, financial institutions and other enterprises, not to greenfield investments. with the supply of such investment opportunities declining, fdi inflows are bound to decline as well. of course, we would be better off today if some of the imbalances could have been prevented. the correction of these imbalances now contributes to economic slack. this raises the question of the extent to which the build - up of the bubbles in the stock markets and, in some countries, on the housing market was due to overly expansionary policies. whether central banks should try to prick such bubbles is open to debate. a good part of the current slack in the world economy reflects a return to more normal underlying conditions. inflated expectations are in a process of being corrected. it is also true that we are moving through a recovery period in which the risks tend to be more on the downside than on the upside. let me mention four potential downside factors. first, risk aversion has soared, as the credibility of profit forecasts has been dented by misreported earnings and uncertainty about the impact of stock options. in this jittery environment, any news that might further impair investor confidence can have a negative impact on the stock markets. the us congress has been quick to take legislative action in an attempt to restore confidence in