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Global growth downgraded as Ukraine drags


Morgan Stanley have released their note covering the 2022 Midyear Economic Outlook. Most major economies, including the U.S., Europe, the United Kingdom and China, are each tracking toward GDP growth that will be half that of 2021.

On the downside, Russia is estimated to decline by 12% in 2022 in regard to GDP. It will be the country’s steepest contraction since 1994. However, there are some positives: India is on track to for 7.4% growth. GDP growth for Korea and Taiwan remains healthy. While Japan’s 1.9% estimated growth for this year is modest, it is an improvement over last year.

The question is whether the Australian economic outlook is slowing or stopping?

  • Morgan Stanley says “The litany of risks to the global economy is now well known: Central bank tightening, ongoing supply chain disruptions, persistent inflation, the lingering effects of a pandemic and a war in Eastern Europe. In normal times, any one of these could drag down global growth—but these aren’t normal times.”

    Morgan Stanley Chief Global Economist Seth Carpenter, says we are in “the most chaotic, hard-to-predict macroeconomic time in decades.” With the global economy contracting sharply, Morgan Stanley revised its GDP forecasts to take into consideration the last three months. 

    Under Morgan Stanley Economists’ base case, global GDP will end 2022 up 2.9%—less than half that of 2021.

    The team at Morgan Stanley are fairly confident the global economy will not sink into recession this year. The most probable result will be global GDP growth of 2.9% in 2022 which is less than half of 2021. Keep in mind, 2021 was artificially boosted by mass fiscal stimulus, accommodative monetary policy and COVID-19 business rebounds.

    Carpenter says, “The biggest risks—namely, a European embargo on imports of oil from Russia and persistent Covid lockdowns in China—are not likely to occur in tandem. The alignment of those unlucky stars is possible, hence the rising risk, but it is not something we would count on.”

    Here are Morgan Stanley’s forecasts:

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