SINGAPORE (July 21): The global economy is expected to return to pre-Covid-19 levels by 4Q2020, with developed markets (DMs) recovering by 4Q2021, say Morgan Stanley analysts in a July 15 report.
The report comes on the back of an embattled US, where Covid-19 infections have reached record highs over consecutive days. Six months after the pandemic first reached the US, over 3,754,000 cases have been reported, with at least 137,000 deaths.
That said, the American investment bank remains upbeat on the economy’s resilience. “The status of Covid-19 in the US today differs from the early days of the outbreak: the median age of those infected is lower, treatment options are better and fatality rates have declined,” say Morgan Stanley analysts.
“While we expect rolling and selective lockdowns to manage clusters of infections, we don’t expect a return to the strict statewide [or] nationwide lockdown conditions we saw earlier this year.”
That said, the forecast acknowledges a downside of the possibility of new cases, “particularly in the US”, rising out of control past September.
“Large numbers of Covid-19 cases coinciding with the traditional flu season, which starts in October and accelerates from mid-November onwards, will add to strains on hospital capacity which could lead to another strict lockdown.”
The report outlines three factors that will shape global recovery: virus dynamics, treatment and vaccine developments, and policy support.
“Overall, the global economy is largely on or ahead of the V-shaped trajectory we laid out in our mid-year outlook. Given that many economies have made up [for] significant lost ground over May-June, the pace of the sequential increases in the high frequency indicators is likely moderate, and we see scope for the upside surprises to shift toward Europe and EMs excluding China.”
On the US, Morgan Stanley points out that the country has avoided a return to broad lockdown measures thus far. Asia and Europe as well as select US states have achieved higher levels of economic activity without aggressive lockdowns, helping to sustain improvement in US and global growth, note the report.
The work for a cure is also underway, say analysts, and the progress has been “promising”.
“Results of antibody treatment studies could come in August [or] September and our US biotechnology analyst Matthew Harrison believes that we could see positive Phase III results by early to mid-November,” note analysts.
Last week, Reuters reported that drug-makers partnered with the US government are on track to begin actively manufacturing a vaccine for Covid-19 by the end of the summer.
Citing an anonymous senior US official, the report placed US vaccine production at just four to six weeks away.
“The Trump administration has helped finance the development of four Covid-19 vaccines so far though its Operation Warp Speed Program, which aims to produce 300 million vaccine doses by the end of 2021,” said the July 13 report.
On policy support, timely, sizeable and coordinated easing has helped support the recovery, note Morgan Stanley analysts.
“We expect an additional US$1 trillion ($1.39 trillion) fiscal stimulus in the US (with risks skewed towards a bull case scenario of $1.6-2.4T) and approval for the European Recovery Fund before the August break.”
