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Morgan Stanley warned investors on Tuesday that the coronavirus pandemic is fundamentally disrupting the world’s economy.
“Global recession in 2020 is now our base case,” Morgan Stanley chief economist Chetan Ahya wrote in a note. “With Covid-19 spreading in Europe and the US after hitting Asia, the disruptions and dislocations in the economy and markets will trigger a [year over year] contraction in global growth in [the first half of 2020].”
Morgan Stanley believes the U.S. government is undertaking a “strong monetary and fiscal policy response” that “will help revive global growth” in the third quarter of this year. But, overall, Ahya said global economic growth will slow to 0.9% this year, “the lowest since the global financial crisis.”
“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,” Ahya said.
– CNBC’s Michael Bloom contributed to this report.
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