Morgan Stanley expects the eurozone to enter a recession in the second quarter of the year amid reduced energy supplies from Russia.
In a report published on Wednesday, Morgan Stanley economists write that the economy will shrink for two quarters before returning to recovery in the second quarter of next year, mainly due to increased investment.
They have changed their estimates due to the possibility of reduced gas flows from Russia to Europe, and as consumer and business climate indicators decline as high inflation persists.
“The risks surrounding the outlook have intensified,” said Morgan Stanley analysts.
Despite the slowdown, they said that with inflation so high, they continue to expect the ECB to raise the deposit rate at each meeting this year to 0.75% in December, although they acknowledged that it could halt increases after September, if prospects worsen.
Source: Capital
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