Morgan Stanley predicts that global economic growth in 2022 will be half that of 2021.

Due to concerns from the Russia-Ukraine war and the COVID-19 spike in China, Morgan Stanley (NYSE:MS) expects global economic growth to be less than half that of 2021, even as central banks tighten monetary policy to contain record high inflation.

On a year-over-year basis, the brokerage predicts global growth to be 2.9 percent, roughly 40 basis points lower than consensus, compared to 6.2 percent in 2021.

In a note dated Tuesday, Morgan Stanley economists wrote, “The deceleration is global, driven by a combination of waning fiscal impetus, tightening monetary policy, a continuing drag from Covid, persistent supply chain frictions, and, most recently, repercussions from the Russian invasion of Ukraine.”

After Russia was sanctioned by the West for its invasion of Ukraine, commodity and oil prices rose, aggravating inflationary pressures internationally and forcing governments and central banks to rethink their monetary policies.

China’s COVID-19 restrictions have slowed manufacturing output and stifled domestic demand, wreaking havoc on the economy, with export growth dropping to its lowest level in over two years.

With a settlement to the Ukraine conflict appearing improbable and global central banks already attempting to reduce GDP in order to control inflation, Morgan Stanley economists believe that economic growth will be constrained.

Before Russia’s invasion of Ukraine drove energy prices skyrocketing, the US and UK central banks joined other major countries in raising interest rates to deal with a jump in inflation that they had termed as temporary following the post-pandemic reopening of the global economy.

Morgan Stanley claims that the global slowdown is widespread, with Japan and India being the only two large economies where the brokerage does not expect a significant slowdown.

“In the projected timeframe, we do not envisage global GDP reverting to the pre-Covid trajectory,” the brokerage stated.

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