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Even
the one-in-five chance of a normal recession remains low, the
bank's U.S. economists said, as they cut their 2016 growth
forecast to 2.1 percent from 2.5 percent.
"We cannot rule out a recession in the next year. Accidents will
happen and we are concerned about the lack of policy ammunition
to deal with a major shock," said Ethan Harris and Emanuella
Enenajor in a note on Friday.
"However, when markets are in such a fragile state there is a
temptation to lose sight of the economic fundamentals. To us,
the economy is okay and recession risks are low," they said.
BAML had previously put the chance of a recession at 15 percent.
Stocks around the world have had one of their worst starts to a
year on record, with slumping oil prices, deepening concern over
China, and the Federal Reserve's first interest rate hike in a
decade all spooking investors.
A recession is typically defined as two consecutive quarters of
economic contraction. The U.S. economy ground to a virtual
standstill in the fourth quarter of last year, according to many
estimates, and the manufacturing sector is already in recession.
Earlier this week, economists at Citi said the risk of a global
recession was rising, Morgan Stanley put the probability at 20
percent in a worst case scenario and French bank Societe
Generale said it was 10 percent and rising.
(Reporting by Jamie McGeever, editing by Nigel Stephenson)
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