LONDON (Reuters). Morgan Stanley (NYSE: ) announced Monday that it had reduced its Euro Area economic growth forecasts this year as well as the next. This was in anticipation of a substantial slowdown in second-half economic growth.

According to the investment bank, while the Euro area’s economy has been resilient, there are still challenges ahead. Russia is likely to reduce energy flows and China will impose strict COVID-19 restrictions on its growth.

Morgan Stanley announced Monday that its 27% Euro Area GDP Forecast has been lowered to 2.7% (from 3% before) and that its 1 percent reduction in 2023 forecasts of growth to 1.3% was effective immediately.

The note stated that “despite the resistance in economic activity to geopolitical headwinds so far, we think more tangible impacts will show during the second half the year through various channels for transmission.”