Morgan Stanley: ‘World Facing Deep Global Recession’
By Stefan J. Bos, Special Correspondent Worthy News
(Worthy News) – The world’s largest investment bank and financial services company warns of a “deep global recession” due to the new coronavirus pandemic. New York-based Morgan Stanley says worldwide economic growth could slow by as much as 0.9 percent this year. “[The virus] COVID-19 is at once a human tragedy and unparalleled synchronous shock, affecting both the demand and supply sides of the global economy,” writes Morgan Stanley chief economist Chetan Ahya in a note.
In the memo, seen by Worthy News, Ahya claims global economic growth will slow to “the lowest since the global financial crisis.” Ahya suggests that the 0.9 percent contraction of the global economy comes at a sensitive time. “This time will be worse than the global recession of 2001. 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.”
The economist expects the world to experience “the weakest pace of growth during peacetime since the 1930s.” Additionally, Morgan Stanley suggests a $360 billion loss to the nominal U.S. gross domestic product (GDP). Despite the gloomy prospects, Morgan Stanley believes the U.S. government has a “strong monetary and fiscal policy response” that “will help revive global growth” in the third quarter of this year.
In an unwelcome development for President Donald Trump, the firm expects U.S. quarterly GDP to slow and not recover until the first half of 2021. U.S. presidential elections are in November, and Trump has made economic strength a vital campaign theme. However, Morgan Stanley cautions that the U.S. economy will still see 1.8% growth in the first quarter of 2020, 0.3% in the second quarter, 0.2% in the third quarter, and 0.2% in the fourth quarter.
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