FX.co ★ Morgan Stanley expects V-shaped recovery

The world’s leading economists still disagree on the further recovery of the global economy hit by the coronavirus outbreak. However, the prevailing opinion belongs to analysts at Morgan Stanley. They claim that the global economy will experience a V-shaped rise.

Morgan Stanley economists suppose that the global economy is in a new expansion cycle and output will return to the pre-crisis levels by the fourth quarter of the year. They are confident in a V-shaped recovery.

The bank predicts a "sharp but short" recession. In the second quarter, the global GDP is expected to reach the bottom slumping by 8.6% year on year. However, by the first quarter of 2021, the indicator could recover to 3.0%.

Analysts at Morgan Stanley believe that the recession will hardly be long amid the current conditions. They are sure that the global economy will show a rapid revival. There are several reasons for that. First of all, most governments have taken strong emergency measures to support their economies. Morgan Stanley also emphasized that these measures could be expanded in the near future. Moreover, both central banks and finance ministries are pumping money into their economies.

Only deterioration in the epidemiological situation may pose risks to the outlook. "In our base case, we assume that a second wave of infections will occur by autumn, but that it will be manageable and result in selective lockdowns," the economists wrote. They also hope that a vaccine will be broadly available by the summer of 2021.

"In contrast, we assume in our bear case that we re-enter into the strict lockdown measures implemented earlier this year, resulting in a double-dip," experts wrote. In other words, new quarantine measures may lead even to more disastrous consequences. The fact is that the second virus outbreak could be larger than the first one. In this case, the world’s economies are likely to face another wave of crisis.