Morgan Stanley economists said recently that the global economy will return to the pre-pandemic levels by Q4, though the world faces a likely second wave outbreak of the coronavirus.
In a mid-year outlook research note by the bank, economists led by Chetan Ahya wrote that they have “greater confidence in our call for a V-shaped recovery, given recent upside surprises in growth data and policy action.”
Though estimating a “sharp but short” recession — -8.6% year-on-year in Q2, the economists expected a recovery to 3% by Q1 of 2021.
The bank cites the following reasons for 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
The economists don’t expect official support to ease anytime soon while the risks to their outlook include future development of the pandemic and the vaccine, according to the note.
Assuming the second wave to hit by Autumn and a vaccine is widely available by Summer in 2021, the economists said it will be manageable and result in selective lockdowns.
However, there will be a double dip in the worst scenario where countries re-enter into the strict lockdown measures seen earlier this year, according to the note.
The IMF is not as optimistic as Morgan Stanley, saying recently that the global economy is recovering slower than expected while still facing profound uncertainty.
The recent jump in new cases in some states in the US and in Beijing, China might signal another wave of outbreak in the world's two largest economies, which could drag the global recovery.
