Pimco forecasts significant UK downturn in 2024
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The news: One of the globe’s largest active bond fund managers has warned that the UK could face a serious downturn next year, casting doubt over its ability to achieve a soft landing, The Financial Times reports.
The numbers: The IMF’s October data shows UK real GDP at 0.5%, while the EU sits at 0.7%. By comparison, US real GDP is pushing ahead at 2.1%. The UK economy also unexpectedly contracted 0.3% during October.
The context: According to the FT, the bond fund manager has been taking larger positions against UK government bonds compared to US equivalents, as the US looks set to cut interest rates during 2024.
Pimco is the latest player to forecast warnings about the UK’s economic strength into next year, as the country continues to struggle compared to other western nations. Morgan Stanley’s 2024 forecast sets the UK’s base GDP at -0.1%, compared to Australia's 1.6% and the US’ 1.1%.
What they said: Chief investment officer at Pimco, Daniel Ivascyn, told the FT that the UK has a “higher probability of more significant economic deterioration” than the US. Ivascyn reasoned that this is because the UK is “a smaller, open economy, with a consumer that’s feeling the brunt of central bank policy far more than their US counterparts.”
The source: Financial Times
