Morgan Stanley: Global Recession Possible in 2013

Wednesday, 21 Nov 2012 08:15 AM

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
The global economy could contract by 2 percent next year, according to a worst-case forecast prepared by Morgan Stanley economists.

On the flip side, the global economy could grow if the United States avoids the fiscal cliff, Europe contains its debt crisis and emerging markets avoid a hard landing.

It’s up to policymakers to save the day.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

“More than ever, the economic outlook hinges upon the actions taken or not taken by governments and central banks,” Morgan Stanley said in a report, according to CNBC.

The worst-case scenario sees the United States going over the fiscal cliff — a combination of tax hikes and spending cuts kicking in at the same time next year — and the European Central Bank deciding not to cut interest rates or roll out its bond-buying program, which would lower borrowing costs and ease credit conditions in countries such as Spain.

Investors, meanwhile, need to stay on their toes.

“Importantly, investors should keep an open mind and be prepared to switch between the scenarios as policy developments unfold,” Morgan Stanley economists concluded.

On the flip side, however, the global economy could grow 4 percent next year if policymakers around the world take action, outpacing this year’s project growth rate of 3.1 percent, the bank’s economists added.

Other noted economists worry 2013 could be a bumpy year as well.

Four elements — stalling U.S. growth rates, Europe’s debt crisis, cooling emerging markets, namely China, and military conflict in the Middle East — could combine into one superstorm and bruise the economy next year, says New York University economist Nouriel Roubini.

Even if all four factors don’t collide into one powerful storm, the forecast is still bleak.

“The perfect storm is not my baseline scenario. My baseline scenario is one of low economic growth in advanced economies and recession in some of them — like the eurozone, like the U.K., like Japan — but not recession in the U.S., slower economic growth in emerging markets; that’s the baseline,” Roubini told Bloomberg.

“So even if you do avoid the perfect storm the outlook for the economy and for financial markets next year will be a bumpy and a risky one.”

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

© 2014 Moneynews. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Retype Email:
Country
Zip Code:
 
You May Also Like
Around the Web

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved