PIMCO "US and Europe May Enter Technical Recession in First Half of This Year"

[Asia Economy Reporter Jeong Hyunjin] On the 8th (local time), PIMCO, the world's largest bond management company, warned that the US and European economies are now certain to enter a 'technical recession' in the first half of this year. This is because the economic damage is expected to materialize due to weakened demand and supply caused by the novel coronavirus infection (COVID-19).

According to Bloomberg News, Joachim Fels, PIMCO's Global Economic Advisor, expressed concerns about the slowdown in Chinese manufacturing and the deterioration of revenues in the travel-related service industry in a memo sent to clients on the same day, stating, "The worst-case scenario for the economy will unfold over the coming months."

Advisor Fels diagnosed that there is a "clear possibility" that the US and European economies will experience a technical recession. Generally, a technical recession is considered to occur when the gross domestic product (GDP) declines for two consecutive quarters. Fels added, "There are concerns that cracks will appear in the US credit cycle in an environment where corporate cash flow is decreasing."

Advisor Fels also predicted that the US Federal Reserve (Fed) will "lower the benchmark interest rate by at least 50 basis points (1bp = 0.01 percentage points)" and said, "There is also a possibility of returning to zero interest rates or resuming asset purchases."

Furthermore, he advised, "Since central banks' policy leeway is not as strong as before and there is uncertainty in the corporate credit market, investors should be cautious about investing in risk assets, focusing on liquidity and capital preservation."

This content was produced with the assistance of AI translation services.