Economists at the US bank also downgraded their expected global economic growth by about 3.0 percent in 2016.
Analysts at Morgan Stanley stated that the risk of the global economy that falls into recession is rising. Thus, they have raised the potential world recession by about 30 percent, which was previously at 20 percent.
The bank lowered their forecast for 2016 global growth as well by about 3.0 percent, noting that it is “no longer expecting an acceleration in global full-year gross domestic product (GDP) growth, compared to 2015”. Meanwhile, Morgan Stanley expected the global economy to grow by 3.3 percent in the current year, according to his recent notes.
“Over the last few months, the risks to the global growth outlook have increased… Downward revisions to baseline growth forecasts imply that starting conditions for 2016 have deteriorated somewhat since the last forecast update,” according to an economists note by Elga Bartsch, Chetan Ahya and Jonathan Ashworth.
"While we dont believe that a global recession is likely this year, the declining impact of lower oil prices and easier monetary policy on growth starts to worry us.”
The global recession as full-year GDP growth is rated by Morgan Stanley at or below 2.5 percent. In addition, a 20 percent probability to a bearish position of a “deeper and longer recession... projecting around 2.0 per cent GDP growth over 2016 and 2017”.
Meanwhile, analysts recognized the slump in the global growth as a threat in emerging markets led by the United States. The growth is expected to witness a slow of 1.7 percent this year and about 1.6 percent in the next year.
The broader concerns of the bank in the state of the global economy are relative to others like Citigroup, which mentioned that the risk of a global recession continued to rise amid an assembly of risk factors extending from a decline in commodity prices, including worries of a hard landing in China’s economy over emerging markets debt.
Conversely, the Societe General, a French bank lifted the probabilities of a global recession about 20 percent last month.
The International Monetary Fund lowered its global growth estimates in January for the third time in less than a year, which have witnessed a rough economic slowdown in China trade, as well as slumping commodity prices that are hurting Brazil, including a few emerging markets.
On the other hand, the Fund forecast that the global economy would grow about 3.4 percent this year, and 3.6 percent next year, which both suggest a 0.2 percent decline point from the prior forecasts made last October.
Ahead of a low-growth environment, the world economy continues to weaken, Morgan Stanley said.
Factors that have led the global economy to remain vulnerable involves mismanage in controlling financial conditions organized by the US Federal Reserve, the European Central Bank or the Bank of Japan, as well as international capital flows to developing markets, mainly China.
Furthermore, a wide range of geopolitical risks such as the rivalry between the Middle East and the inflows of refugees, particularly in Europe and Turkey, also hovers to weigh on the world growth.
Morgan Stanley Loses Against Rivals
Morgan Stanley loses three bond traders in its fixed-income division, according to sources. The bank expected a decline on bond yields earlier this week, as demand is anticipated to rally for fixed-income assets before forecasted volatile markets.
The three bond traders are linked to sovereign bonds and corporate bond trading. For sovereign bond trading, Elias Abud is responsible, while for corporate bonds, Johann Komander, along with George Fernandes deals with it.
Meanwhile, Morgan Stanly lost them to Nomura Holdings, Inc., including Goldman Sachs Group, Inc., and