(Bloomberg) -- The crystal ball appears to be in good working order at UBS Group AG, at least when it comes to Italy.
Analysts and strategists at the Swiss bank said in a report published on Thursday morning that they continue to see downside risks to the bank's estimate for 0.4 percent gross domestic product growth in 2019. They added that the deficit targets Italy's populist government agreed to with the European Union are likely to prove “difficult to achieve.”
Hours later, Bloomberg reported Italy is set to cut its GDP growth forecast to 0.1 percent from 1.0 percent, according to two senior officials with knowledge of the draft outlook. Add to this that the officials said Italy's budget shortfall will be 2.3 percent to 2.4 percent, compared to the 2.04 percent target that had been agreed on with the EU. Two for two for UBS.
The report made clear that UBS remains cautious on all Italian asset classes. The risk-reward on both equities, which entered a bull market on Wednesday, and credit “do not appear compelling,” it said. The weak macroeconomic outlook and the risks that instability in Italian politics bring will also keep the country's government bonds range-bound, while the global bid for bond yields will only bring limited benefits for its credit market, the bank said.
To contact the reporter on this story: Sam Unsted in London at sunsted@bloomberg.net
To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, John Viljoen, Celeste Perri
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