Economic Growth: Morgan Stanley warns of slowing global economic growth in 2022

Morgan Stanley predicts this year’s global economic growth will be less than half of 2021 due to the Russia-Ukraine conflict and the risk of COVID-19 growth in China, even as central banks tighten monetary policy to control record high inflation.

Brokerage expects global growth to be 2.9%, which is about 40 basis points less than agreed, compared to 6.2% growth in 2021, on a year-over-year basis.

“The recession is global, driven by a combination of declining financial incentives, tightening monetary policy, and continuing to pull from Covid,”

The friction in the supply chain, and more recently, the response to the Russian aggression in Ukraine, “wrote economist Morgan Stanley in a note on Tuesday.

Commodity and oil prices have skyrocketed since Russia imposed Western sanctions on Ukraine, prompting worsening global inflationary pressures and prompting governments and central banks to rethink their monetary policy.

China’s stringent COVID-19 sanctions have cut off factory production and reduced domestic demand, with its export growth weakening in nearly two years and affecting its economy.

As a resolution of the Ukraine crisis looks unlikely and global central banks are already trying to slow growth to control inflation, Morgan Stanley economists expect the rise in economic growth will be limited.

Last week, the central banks of the United States and the United Kingdom joined other major economies to raise interest rates in the face of rising inflation, which they described as temporary after the reopening of the global economy after the Russian invasion of Ukraine. Energy prices spiral.

Morgan Stanley said the slowdown is largely based on global growth, and only two major economies where brokerage does not see significant slowdown are Japan and India.

“We do not now see a return to pre-coupid trends during the global GDP forecast period,” the brokerage added.