Following a strong recovery after the onset of the COVID-19 pandemic, growth in the European Union (EU) is expected to sharply decelerate in 2023 as high inflation and increasingly tight monetary policy dampen economic activity. Despite considerable resilience, the EU economy is in a weakened spot following the string of overlapping crises since 2020, which have eroded macroeconomic buffers and left the economy vulnerable to additional negative shocks. Fiscal policy support, going forward, will need to be timely, targeted, time bound, and transparent to eventually support gradual fiscal consolidation. Part 1 of the EU regular economic report (RER) focuses on recent developments and the short-term outlook and risks. This part looks at inclusive growth trends in the EU as a whole and the four regions: Northern Europe (NE), Southern Europe (SE), Western Europe (WE) and Central and Southeast Europe (CEE). Depending on data availability, it also zooms in on a set of selected countries - Bulgaria, Croatia, Poland, and Romania.