Morgan Stanley Predicts a Recovery of Global Growth in 2020


Morgan Stanley:

Global growth should recover from 1Q20, reversing the downtrend of the past seven quarters as trade tensions and monetary policy are easing simultaneously for the first time since the downtrend began.

While revealing its global perception, the analyst for American multinational investment bank has expressed the positive forecast that global growth will improve after the dwindling records of the past seven quarters. The situation will be better with the ease of trade tensions and monetary policy relaxations.

The firm is optimistic that through the US-China trade negotiations scheduled on December 15, 2019, regarding tariffs will be instrumental in the overall scenario. If the Trump government imposes additional tariffs, it may lead to a slower growth rate up to 2.8% and may further delay the growth until the third quarter of 3Q20.

The talks may get affected due to US upcoming presidential elections, leading to uncertain monetary policies, including corporate credit risk policy, among others.

If the negotiations go well, the firm is expecting a growth escalation of 3.2% next year, which will be 0.2% more than the growth in 2019, which lingered around 3%.

However, both countries seem to be rigid in their trade policies. Trump’s government is not so lenient towards easing the tariffs on Chinese exports and China too is reluctant towards purchasing US agricultural goods worth $50 billion as per US government demand.

Morgan Stanley analysts are hopeful that as more than 20 banks out of 32 central banks have reduced their interest rates, it will comfort the markets in addition to easing trade tensions along with favourable monetary policies, which will touch to the lowest rate in the past seven.

However, the analyst further forecasts that the US will experience a slower growth rate from 2.3% in 2019 to 1.8% in 2020.

Morgan Stanley predicts,

In 2020 the economy grows more slowly as the bulk of the positive lift from lower interest rates will have been absorbed and households balance higher income with higher prices from tariffs. But the economy is on solid footing with less external drag, sustained easy monetary policy and continues support from the fiscal policy.

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