REUTERS/Susana Vera A family tries to get some sleep outside a store in Madrid after being evicted from their rental apartment on June 8, 2012.
The US investment bank raised its estimate on the probability from 30%, because of Brexit and the political and economic instability of its aftermath.
In the UK, the leadership situation has been "increasingly fluid," Morgan Stanley noted. in Europe, protest parties are gaining popularity. And no one is sure how or when the actual "Brexit" is going to take place.
The UK, Europe, and the rest of the world has been caught up in this uncertainty.
"The negative impact of a rise in political uncertainty on risk assets and demand growth is well documented… as a result, we are more cautious on global growth." So they're raising the probability of recession from their previous 30% to 40%," Morgan Stanley said in a note.
The researchers also charted the impact of Brexit on the GDP growth of different regions, depending on if the result proves to be a "medium stress" or "high stress" scenario.
Morgan Stanley Research forecasts
The UK is clearly and unsurprisingly the most at-risk to suffer a growth slowdown. For most countries, including the UK, the setback to GDP growth will be more acute in 2017 than during the rest of 2016.