NEW YORK - August 18, 2011 - Morgan Stanley slashed its global growth forecast for 2011 and 2012, saying the U.S. and euro zone were "dangerously close to a (Depr)ession", and criticized policymakers in Washington and Europe for not acting more decisively to contain the sovereign debt crisis.

The bank cut its global gross domestic product growth forecast to 3.9% from 4.2% for 2011, and to 3.8% from 4.5% for 2012.

"Our revised forecasts show the U.S. and euro areas hovering dangerously close to a (Depr)ession over the next 6-12 months," said Joachim Fels, who co-heads Morgan Stanley's global economics team, in a research note dated Wednesday.

That was not the bank's base case scenario, he said, noting the corporate sector still looked healthy and lower inflation will ease pressure on consumers' pocketbooks, while central banks such as the Federal Reserve and European Central Bank could try to further loosen policy.

Still, "it won't take much in the form of additional shocks to tip the balance," added Fels. "A negative feedback loop between weak growth and soggy asset markets now appears to be in the making in Europe and the U.S."