NEW YORK, Aug. 18 (Xinhua) -- Morgan Stanley and Goldman Sachs slashed their forecasts for global economic growth, citing weaker- than-expected growth in the second quarter of this year, along with slower global trade growth and additional austerity measures announced in several countries.

Morgan Stanley cut its forecast for global growth this year to 3.9 percent, down from 4.2 percent. The bank said that the debt burdens of developed nations from the U.S. to Europe has roiled world markets this month and wiped trillions of dollars off the value of equities. At the same time, slowing expansions in countries including Germany, the key driver of European growth, are hurting confidence.

Morgan Stanley analysts said the U.S. and Europe are " dangerously close to recession", adding that recent policy errors, especially Europe's slow and insufficient response to the sovereign crisis and the drama around lifting the U.S. debt ceiling, have weighed down on financial markets and eroded business and consumer confidence.

Goldman has took a similar move on Thursday, lowering its forecasts for world GDP growth to 4.0 percent in 2011 and 4.4 percent in 2012, down from 4.1 percent and 4.6 percent respectively.

Goldman predicted that U.S. GDP growth in 2011 and 2012 will reach 1.7 percent and 2.0 percent, down from 1.8 percent and 3.0 percent of its previous forecasts. The euro zone expansion is estimated at 1.9 percent this year and 1.4 next year, also sharply down from 2.1 percent and 1.7 percent respectively.

The pessimistic reports further pressured on the financial market together with a latest string of dismal economic data. Money flooded into safe havens like U.S. Treasurys and gold, while U.S. stocks and commodities suffered heavy sell-off.