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The world economy is on the verge of recession. This year, global GDP may shrink by more than 50% compared to last year, The Morgan Stanley warns.
According to experts from the US bank, global economic growth in 2022 is unlikely to reach even half of the rate of the previous year. It will be only 2.9%, while in 2021 global GDP showed a growth of 6.2%.
Two fundamental factors will contribute to the slowdown of global economic growth. Firstly, it is the ongoing military conflict between Russia and Ukraine. The second one is the wave of COVID-19 in China.
The unprecedented sanctions imposed by the West against Russia in response to its military operation in Ukraine have already caused the price of commodities and oil to skyrocket.
This has increased inflationary pressures around the world and forced many central banks to tighten their monetary policies.
Now many regulators are aimed at weakening fiscal stimulus. This will put strong pressure on economies and global economic growth as a whole for the foreseeable future, according to analysts at The Morgan Stanley.
Experts also see an increased risk of recession amid a new coronavirus outbreak in China. The country still maintains a zero-tolerance policy for COVID-19, continuing to fight the spread of the disease by imposing lockdowns.
The tightening of measures to combat the virus in China has led to a halt in industrial production in the country and limited domestic demand.
This had a negative impact on the local economy. Last month, China's export growth slowed to its lowest level in nearly 2 years.
Continuing restrictions in major Chinese cities could undermine other economies as well, as problems in global supply chains severely limit production and economic growth.
The Morgan Stanley believes that the slowdown of the economy is a global trend. However, the bank singles out two countries that can avoid a recession in 2022. They are Japan and India.
According to the latest data, Japan's GDP rose by 0.8% in March on the back of increased domestic consumption amid lifted quarantine measures. This is the second consecutive monthly increase in the indicator.
The International Monetary Fund predicts that India's economy will gain 8.2% this year, making it the top gainer in the world.
By comparison, The Morgan Stanley expects China's GDP to be only 4.2% in 2022, about half of its last year's grow.
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