The brokerage forecasts year-on-year global growth of 2.9% in 2021, compared to growth of 6.2% in 2021, about 40 basis points below consensus.
“The slowdown is global, driven by the fallout from fading fiscal stimulus, tighter monetary policy, a sustained Covid drag, ongoing supply chain friction and, most recently, the Russian invasion of Ukraine,” Morgan Stanley economists wrote in a report dated Is. Tuesday
Commodity and oil prices rose after Russia was hit by Western sanctions for its invasion of Ukraine, adding to global inflationary pressures and prompting governments and central banks to reevaluate their monetary policies.
China’s strict COVID-19 restrictions have halted factory production and eroded domestic demand, crippling the country’s economy, which has had its export growth down for nearly two years.
A solution to the Ukraine crisis appears unlikely and global central banks are already trying to slow growth to tame inflation, with economists at Morgan Stanley expecting growth to be limited.
Last week, the central banks of the United States and the United Kingdom joined other major economies in raising interest rates to combat a surge in inflation, which they described as tentative after reopening. The pandemic impact of the global economy before Russia’s invasion sent Ukraine’s energy prices skyrocketing.
Morgan Stanley said the slowdown in global growth is widespread, and the only two major economies where brokerages do not see a substantial slowdown are Japan and India.
“We no longer see global GDP in a pre-crisis trend during the forecast period,” the brokerage said.