Morgan Stanley economists think that the economy of the euro area may shrink later this year.
A prognosis by Morgan Stanley that was released on Wednesday and accessed by Bloomberg predicts that the euro area would experience a modest recession in the fourth quarter of this year as a direct result of reduced energy supply from Russia.
According to the projection, the current economic slowdown will last for the next two quarters until the second quarter of 2023, at which point the rate of economic expansion will begin to pick up again. An increase in investment will serve as the primary impetus for this growth.
The prognosis has become more pessimistic as a result of mounting concerns regarding limited natural gas supplies from Russia, as well as decreasing consumer and business sentiment and skyrocketing prices. Additionally, the prognosis has become more pessimistic as a result of rising competition from cheaper natural gas alternatives.
The analysts at Morgan Stanley are quoted as saying that “the risks around the forecast have increased.”
They claimed that in spite of the slowdown in economic activity, the European Central Bank might decide to boost its deposit rate at each meeting this year, bringing it up to 0.75 percent in December by the end of the year. In spite of the fact that the economy is expanding at a slower rate, this would still be the case.
