U.S. may skirt recession in 2023, Europe not so lucky-Morgan Stanley

Reuters

Published Nov 14, 2022 12:09AM ET

By Kevin Buckland

TOKYO (Reuters) - Britain and the euro zone economies are likely to tip into recession next year, Morgan Stanley (NYSE:MS) said, but the United States might make a narrow escape thanks to a resilient job market.

At the same time, China's expected reopening after almost three years of COVID-19 curbs is set to lead a recovery in its own economy and other emerging Asian markets, the investment bank's analysts said in a series of reports published on Sunday.

"Risks are to the downside," the reports said, projecting the global economy to grow by 2.2% next year, lower than the International Monetary Fund's latest 2.7% growth estimate.

Next year, Morgan Stanley predicts a sharp split between developed economies "in or near recession" while emerging economies "recover modestly" but said an overall global pickup would likely remain elusive. China's economy was predicted to grow 5% in 2023, outpacing the average 3.7% growth expected for emerging markets, while the average growth in the Group of 10 developed countries was forecast at just 0.3%.

Central banks across the globe have raised interest rates this year to curb raging inflation, and in the United States, Morgan Stanley predicted the Federal Reserve to keep rates high in 2023 as inflation remains strong after peaking in the fourth quarter of this year.

"The U.S. economy just skirts recession in 2023, but the landing doesn't feel so soft as job growth slows meaningfully and the unemployment rate continues to rise," the report said, predicting a 0.5% expansion next year.