Morgan Stanley Lowers 2011 Global Growth Forecast

Citing political bickering over sovereign debt and renewed concerns over a possible recession, Morgan Stanley MS cut its global growth forecast Thursday. Morgan Stanley lowered its global growth targets for both 2011 and 2012, as uncertainty clouded growth prospects. The 2011 growth forecast was cut to 3.9% from 4.2%, and 2012 was cut to 3.8% from 4.5%. "Our revised forecasts show the US and the euro area hovering dangerously close to a recession - defined as two consecutive quarters of contraction - over the next 6-12 months," Joachim Fels, co-head of Morgan Stanley's global economics team, said in a research note this week. "A negative feedback loop between weak growth and soggy asset markets now appears to be in the making in Europe and the US." Ongoing debt issues in Europe and politicking in Washington, among many issues, have recently sent global markets into a period of volatility. Following S&P's downgrade of U.S. debt earlier this month, wide swings in equity markets have almost become a daily occurrence. Morgan Stanley was notably critical of policymakers in the United States, who only passed a measure to raise the debt ceiling within hours of technically defaulting. "Recent policy errors - especially Europe's slow and insufficient response to the sovereign crisis and the drama around lifting he U.S. debt ceiling - have weighed down on financial markets and eroded business and consumer confidence," Fels noted. Morgan Stanley sees developed market economies averaging 1.5% growth both this year and next, down from 1.9% and 2.4%, respectively. Concerning emerging market economies, the bank sees growth slowing to 6.4% from 7.8% last year. "While we had been calling for a BBB recovery in DM (developed markets) all along, the path now looks even more Bumpy, Below-par and Brittle than previously thought," Fels commented.