July 14 (Reuters) – Global growth will weaken over the next year but will continue to be strong, bond manager Pimco said on Wednesday, with a sustainable investment trend creating risks and opportunities in some sectors.
Pimco portfolio managers Erin Browne and Geraldine Sundstrom gave the forecast in an asset allocation report sent by a spokeswoman. The managers wrote that they expect real gross domestic product in developed markets to grow 6% this year as economies overcome the COVID-19 pandemic and decline to 3% by 2022.
“Backlog, high consumer savings rates, and healthy corporate debt ratios create a runway for privately-run growth,” they wrote, a backdrop that should make growth assets attractive.
Slower vaccination rates in emerging markets have delayed their recovery, the report said, with their GDP expected to grow 3.5% this year and rise to 5% in 2022.
With mid-cycle global economic expansion, they wrote, one factor that may differ from previous rallies is the growth of investment strategies and business practices that focus on environmental, social and governance issues.
The trend should boost demand for sectors like renewable energy, semiconductors and forest products, but could mean risky transitions for traditional oil and gas companies, Pimco wrote.
Attempts to address inequality such as higher minimum wages and better working conditions “will inevitably have an impact on smaller businesses,” the authors write.
They also said that broader redistribution of income “could also mean more aggregate consumption and less propensity to save”.
Reporting by Ross Kerber in Boston; Editing by Leslie Adler
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