Morgan Stanley economists double down on V-shape global recovery

The global economy is in a new expansion cycle and output will return to pre-coronavirus crisis levels by the fourth quarter, according to Morgan Stanley economists.

“We have greater confidence in our call for a V-shaped recovery, given recent upside surprises in growth data and policy action,” economists led by Chetan Ahya wrote in a mid-year outlook research note on June 14.

Predicting a “sharp but short” recession, the economists said they expect global GDP growth will trough at -8.6 per cent year on year in the second quarter and recover to 3.0 per cent by the first quarter of 2021.

Why the recession will be short?

• This is not an endogenous shock triggered by huge imbalances
• Deleveraging pressures will be more moderate
• Policy support has been decisive, sizable and will be effective in boosting the recovery