Morgan Stanley further slashed its growth forecasts for Asia next year due to increasing risks from the debt crisis in Europe and weakening domestic demand. Asia excluding Japan is now expected to grow 6.9 percent instead of its previous estimate of 7.3 percent, the US bank said in a report on Monday. It was the second time in three months that Morgan Stanley has downgraded its growth forecast for the region. \"Since we downgraded our regional growth outlook in August 2011, we have been constantly worried about the increasing downside risks to growth,\" it said. \"In addition to further evidence of weakening domestic demand, the external environment in Europe has made us more concerned about the region\'s growth outlook.\" With a recession expected in Europe and the US economy struggling with economic growth, the risks to Asia\'s growth outlook \"remain skewed towards the downside,\" the bank said. Europe has been grappling with an escalating debt crisis, which has spread from Greece and now threatens to engulf Italy. Italy\'s 1.9-trillion euro ($2.50 trillion) public debt and low growth rate have spooked the markets in recent weeks, prompting concern that it could have to seek a bailout like fellow eurozone members Greece, Ireland and Portugal. French President Nicolas Sarkozy\'s office has said that any problem with Italy would hit \"the heart of the eurozone\". In its report, Morgan Stanley said Asian governments are expected to \"initiate targeted fiscal policy measures\" and further ease borrowing costs in order to boost domestic growth. It expects \"limited\" interest rate cuts in India, Indonesia, South Korea, Malaysia and Thailand next year. Economies that are reliant on external trade such as Hong Kong, South Korea, Malaysia, Singapore, Taiwan and Thailand are more exposed to the effects of the deteriorating global situation, it said. But even countries with bigger domestic markets such as China, India and Indonesia \"will also not escape the downside from this tough external environment,\" it added. Morgan Stanley is forecasting China\'s economy to expand 8.4 percent instead of its previous projection of 8.7 percent. India is expected to grow 6.9 percent, down from its earlier estimate of 7.4 percent and Indonesia is seen growing 5.6 percent instead of 5.8 percent.