Analysts cut global growth forecasts
Source: Agencies |
August 19, 2011, Friday
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MORGAN Stanley has slashed its global growth forecast for 2011 and 2012, saying the US and the eurozone are "dangerously close to a recession."
The bank also criticized policymakers in Washington and Europe for not acting more decisively to contain the sovereign debt crisis.
The bank cut its global gross domestic product growth forecast to 3.9 percent from 4.2 percent for 2011, and to 3.8 percent from 4.5 percent for 2012.
Joachim Fels, who co-heads Morgan Stanley's global economics team, said: "Our revised forecasts show the US and the euro area are hovering dangerously close to a recession - defined as two consecutive quarters of contraction - over the next six to 12 months."
That was not the bank's base-case scenario, he said, noting the corporate sector still look healthy and lower inflation will ease pressure on consumers' pockets, while central banks such as the US Federal Reserve and the European Central Bank could try to loosen policy further.
However, he said: "It will not take much in the form of additional shocks to tip the balance. A negative feedback loop between weak growth and soggy asset markets now appears to be in the making in Europe and the US."
Germany has reported its economic growth came close to stalling in the second quarter, while data from France showed its growth has ground to a halt, raising questions over how much drive can be expected from Europe's top economies.
The clouded growth outlook puts further pressure on European politicians who have been haggling over ways to stop the eurozone's sovereign debt crisis from engulfing larger member countries such as Spain and Italy.
Analysts warn the political wrangling and failure to deliver concrete pledges to increase the size of Europe's rescue fund risks a renewed attack on heavily indebted countries and a further blow to business and consumer confidence.
The US economy also stumbled badly in the first half, coming dangerously close to contracting in the first quarter. High unemployment, the political battle over the debt ceiling and spending cuts, and a stock market slump all helped push US consumer sentiment to its lowest level in more than 30 years.
Morgan Stanley said: "Recent policy errors - especially Europe's slow and insufficient response to the sovereign debt crisis and the drama around lifting the US debt ceiling - have weighed financial markets down and eroded confidence."
Growth will also be hit by the prospect of fiscal tightening in the US and Europe, it added.
The bank also criticized policymakers in Washington and Europe for not acting more decisively to contain the sovereign debt crisis.
The bank cut its global gross domestic product growth forecast to 3.9 percent from 4.2 percent for 2011, and to 3.8 percent from 4.5 percent for 2012.
Joachim Fels, who co-heads Morgan Stanley's global economics team, said: "Our revised forecasts show the US and the euro area are hovering dangerously close to a recession - defined as two consecutive quarters of contraction - over the next six to 12 months."
That was not the bank's base-case scenario, he said, noting the corporate sector still look healthy and lower inflation will ease pressure on consumers' pockets, while central banks such as the US Federal Reserve and the European Central Bank could try to loosen policy further.
However, he said: "It will not take much in the form of additional shocks to tip the balance. A negative feedback loop between weak growth and soggy asset markets now appears to be in the making in Europe and the US."
Germany has reported its economic growth came close to stalling in the second quarter, while data from France showed its growth has ground to a halt, raising questions over how much drive can be expected from Europe's top economies.
The clouded growth outlook puts further pressure on European politicians who have been haggling over ways to stop the eurozone's sovereign debt crisis from engulfing larger member countries such as Spain and Italy.
Analysts warn the political wrangling and failure to deliver concrete pledges to increase the size of Europe's rescue fund risks a renewed attack on heavily indebted countries and a further blow to business and consumer confidence.
The US economy also stumbled badly in the first half, coming dangerously close to contracting in the first quarter. High unemployment, the political battle over the debt ceiling and spending cuts, and a stock market slump all helped push US consumer sentiment to its lowest level in more than 30 years.
Morgan Stanley said: "Recent policy errors - especially Europe's slow and insufficient response to the sovereign debt crisis and the drama around lifting the US debt ceiling - have weighed financial markets down and eroded confidence."
Growth will also be hit by the prospect of fiscal tightening in the US and Europe, it added.
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