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    Coronavirus outbreak will trigger global recession, warns Morgan Stanley

    Coronavirus outbreak will trigger global recession, warns Morgan Stanley

    Coronavirus outbreak will trigger global recession, warns Morgan Stanley
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    By CNBC-TV18  IST (Published)

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    Global investment bank Morgan Stanley on Tuesday warned that the rapid spread of Covid-19 in Europe and the US after hitting Asia, the disruptions and dislocations in the economy and markets will cause global growth to contract in the first half of 2020.

    Global investment bank Morgan Stanley on Tuesday warned that the rapid spread of Covid-19 in Europe and the US after hitting Asia, the disruptions and dislocations in the economy and markets will cause global growth to contract in the first half of 2020.
    “We expect 2020 global growth to dip to 0.9 percent year-on-year, the lowest since the global financial crisis, when global growth bottomed at -0.5 percent in 2009. This time will be worse than the global recession of 2001,” said the note by Morgan Stanley chief economist Chetan Ahya and team, to clients.
    While the policy response will provide downside protection, the underlying damage from both Covid-19’s impact and tighter financial conditions will deliver a material shock to the global economy, Ahya and team said in the note.
    “While most governments and private sector companies in these economies (Europe and the US) are initiating more stringent social distancing measures to contain the spread of the virus, the economic damage will be severe,” the note said.
    Morgan Stanley expects China to see the worst in the current quarter, and the rest of the world, in the coming quarter.
    The bank has forecast China’s growth to contract at -5.0 percent year-on-year in the first quarter before rebounding in the second quarter
    In the US, Morgan Stanley expects a 4 percent contraction in the second quarter and a slow recovery from the third quarter of 2020. Within developing markets, Eurozone is expected to see the most downside with full-year growth contracting at -5 percent.
    “With looming recession risks, the G4 plus China will expand their primary fiscal deficit by 200bp in 2020. We think combined monetary and fiscal easing will help to revive the global economy from 3Q20 (third quarter of 2020), while a contraction in YoY (year-on-year)growth in 1H20 will still be inevitable,” the note says.
    Morgan Stanley has warned that if the disruption from Covid-19 persisted into the third quarter of 2020, the recession could be even deeper, with full year global growth averaging -0.6 percent.
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