Global Recession Is Now “Base Case”, Says Morgan Stanley, Forecasting GDP in 2020 at 0.9%

Global Recession Is Now “Base Case”, Says Morgan Stanley, Forecasting GDP in 2020 at 0.9%.

Morgan Stanley has stated in the analysis that the global economy will enter a recession in 2020 with the spreading of coronavirus (COVID-19) starting to disrupt the economy in Europe and Asia.

 

The disruption in the economy will lead to a contraction in global growth in the first half of 2020, in which Morgan Stanley expects global growth in 2020 to slip to the lowest since the global financial crisis at 0.9%. Meanwhile, China, the epicenter of the virus outbreak, is expected to see its growth to contract to -5.0% in the first quarter of 2020 before starting to rebound in 2Q.

The recovery would begin in the third quarter, revived by strong policy response. Currently, all G4 central banks have announced a quantitative easing measure. The global policy rate is at an average of 0.48%, which is far below post-crisis lows and could still decline further. The G4, including China, will expand its primary fiscal deficit by 200bp in 2020, stated Morgan Stanley.