(Adds quotes from Pimco executive; details of outlook report)
NEW YORK, Sept 17 (Reuters) - U.S. bond firm Pimco cut its growth expectations on Wednesday for the eurozone, China and so-called BRIM countries (Brazil, Russia, India and Mexico) for the next 12 months.
Pimco Total Return Fund, run by Bill Gross, is the world’s largest bond fund. It said the eurozone economy could grow about 1 percent in the next 12 months. That compares to Pimco’s baseline expectation in the spring that the eurozone could grow between 1 percent and 1.5 percent.
Pimco added that the firm expects Japan to grow about 1 percent to 1.5 percent in the next 12 months, with China’s growth to slow to around 6.5 percent, down from its growth range of 6.5 percent and 7.5 percent earlier this year.
Pimco also expects that as a group, the BRIM economies will grow just 2 percent in 2015, a significant slowdown from the 3 percent to 5 percent growth rates achieved in prior years.
Pimco managing director Saumil Parikh, who authored the outlook report, said eurozone projections were downgraded because of its ”painfully slow climb out of a double-dip recession.“ He added: ”The cyclical growth and inflation outlooks for the eurozone and Japan remain hostage to significant policy dissonance and geopolitical risk there.
“In the eurozone, expansionary fiscal policy in the form of aggregate demand support and/or financial sector balance sheet repair has been absent in the post-crisis period (with a few exceptions) and is unlikely to play a role in cyclical developments next year,” Parikh said.
Pimco, which oversees $1.97 trillion in assets as of June 30, said it remains “more pessimistic” on the Chinese cyclical outlook than consensus expectations and look for growth to slow to around 6.5 percent during 2015. “Further, our degree of certainty on Chinese economic growth is lower than in other countries for the cyclical horizon ahead,” Parikh said.
The outcomes for other developing economies will be tied to what happens in China next year. “While Mexico and India are less tied to China, and recently both show signs of accelerating structural policy changes necessary for growth, Brazil and Russia will continue to look to China for external demand support,” he added.
Back home, Pimco said it kept its range on the U.S. economy, forecasting that growth will be between 2.5 percent and 3 percent in the next 12 months against a backdrop of ”a continuation of this low amplitude, long frequency U.S. business cycle recovery.
“With the ongoing assistance of easy monetary policy combined with healthy private financial sector balance sheets, the U.S. economy is poised to grow between 2.5 percent and 3.0 percent in the coming year with corporate capital expenditures accelerating on the back of rising pricing power and ex ante expected returns on newly invested capital,” Parikh added. (Reporting By Jennifer Ablan; Editing by Chizu Nomiyama and Tom Brown)