After the hike in interest rates by the Central Bank of Turkey on September 13 (625 basis points from 17.75 percent to 24 percent), the Turkish government today (Thursday) unveiled a new economic program for the next three years (2019-2021). BBVA Research in a report released Thursday believes that both monetary policy and fiscal policy are now better geared toward correcting inflation and the imbalances of the Turkish economy.
BBVA Research | Geo-World: Conflict & Social Unrest
BBVA Research | Geo-World: Conflict & Social Unrest
The Central Bank of the Republic of Turkey (CRBT) decided today to raise the official interest rate by 625 basis points from 17.75 percent to 24 percent. As a BBVA Research report points out, the hike came in above market expectations (21 percent according to Bloomberg consensus estimates), and BBVA Research’s own forecast (22.75 percent). BBVA Research welcomes the move and believes it should be backed up by a medium-term coherent and detailed fiscal plan.
The negotiations between Mexico, the U.S., and Canada have been a recurring topic in the news recently. BBVA Research has used big data techniques to monitor the media coverage and tone used by the national media outlets in each North American country as the slow-going renegotiation of this agreement has been reported.
In recent months, concerns surrounding the financial health of the business sector have been on the rise. In particular, market participants are worried that higher price pressures, faster monetary policy normalization, and a trade war, amid stretched valuations, could trigger a significant decline in risk appetite. This would lead to higher borrowing costs and tighter financial conditions.
Political concerns in Italy and the intensification of geopolitical tensions between the U.S. and Turkey set a cautious tone in financial markets last week. The tone was not alleviated by the possibility of an easing in trade disputes between China and U.S.
The European Commission enters the final stretch of its mandate. The commissioners who took office in 2014 will leave their posts after the next European elections (in May 2019). Before the current members of the Commission and the European Parliament are replaced, both institutions will conclude negotiations and approval of some of the EU’s priority measures.
International investment in infrastructure projects continues to be insufficient. This is the conclusion reached at the B20 summit where global companies provided guidance to the G20. According to the task force charged with studying growth and infrastructure financing, the infrastructure investment gap needs to be resolved to exploit the sector’s enormous potential and drive more inclusive development.
The European Union is already readying itself for the possible exit of the United Kingdom from the European club without an agreement between the two sides. Although no scenario has been ruled out, Miguel Jiménez, the chief economist for Europe at BBVA Research, argued in a recent article published in El País that “a no-deal exit in March, with no transitional period, is no longer inconceivable”. In his opinion, this would be the worst possible outcome of Brexit.
The European Central Bank in 2018 began the turnover process in a number of key posts on its Executive Board. The crux will be the end of Mario Draghi’s term in office in October 2019 amid doubts about whether his departure will coincide with a hike in interest rates expected between the summer and the fall of next year.
The European Central Bank on Thursday announced it is maintaining its monetary policy unchanged. Interest rates will remain at current levels until the summer of 2019 or “as long as necessary”, as announced in its June meeting. In doing so, ECB President Mario Draghi gave no further clarification on the next steps in the bank’s roadmap and intoned the mantra of prudence and patience.
BBVA Research maintains its GDP growth forecasts for Spain at 2.9 percent for 2018 and 2.5 percent for 2019. The increasing likelihood that some risks might finally materialize could drive the Spanish economy to slower growth scenarios, according to the latest Spain Economic Outlook report published by BBVA’s studies unit. The report was presented today by Jorge Sicilia, Chief Economist of BBVA Group and Head of BBVA Research, Rafael Doménech, Head of Macroeconomic Analysis of BBVA Research and Miguel Cardoso, Chief Economist Spain and Portugal. Under this scenario, the country is expected to generate about 880,000 jobs over the two-year period, causing the country’s unemployment rate to drop below 14%.
The European Council meeting held on June 28 and 29 took some steps toward euro reform; conclusion of agreements will likely occur at the next meeting in December. Although it was hoped that the summit would address key questions like the budget proposed by Germany and France, ultimately the European partners chose to adopt a minimum agreement. The agreement includes measures such as support for a banking resolution fund, but the reform of the euro was deferred.
After the bare minimum agreement on the banking union achieved at the recently held European Council, the debate about the future of Europe continues unabated. With this agreement still fresh, the Bank of Finland invited scholars, representatives of the financial sector and regulators talk about the future of the Old Continent. The experts gathered in Helsinki called for advancing towards a greater banking and capital markets union. The next date in the calendar: The European Council meeting in December.
At its meeting on June 14, the European Central Bank (ECB) set an expiry date for the asset purchase program: December of this year. The program, which started in March 2015, is now approaching its end. It forms part of the non-standard measures that Mario Draghi’s institution implemented during the toughest years of the economic crisis. What do they consist of?
The Council of Europe will hold its June summit at a complex time with significant challenges on economic, political, and social issues. As BBVA Research points out, it also represents an opportunity to further strengthen the EU’s Economic and Monetary Union. As such, the reform of the euro will be one of the decisive elements, although also one of the most controversial.
“I love food and I am mad about sports.” Hearing him talk about his hobbies, Jaime Sáenz de Tejada (Madrid, 1968) comes across as someone who enjoys life. As a kid he was into basketball and track and field. Later, he got interested in paddle tennis and golf. About a year and a half ago he fractured his thigh bone forcing him to focus a bit more on swimming and cycling. He defines himself as a lover of Peruvian cuisine, because it offers “the best fusion of sensitivities from many places, with ingredients of unparalleled quality.” He’s even given cooking chifa (a fusion of Peruvian ingredients and traditions with Cantonese elements) a go, but “being surrounded by so much talent, I would never dare to compete in culinary skills.” Married and with five children – “one of them is on his way to becoming a chef, just like his mom,”- he’s been a part of BBVA for more than 25 years. In 2014 he became the Group’s Chief Financial Officer. He devotes most of his scant free time to “living his children’s education intensely and sharing activities with them.” He’s been lucky to live in New York – at two different periods – , London, Uruguay and Peru.
As the European Central Bank celebrates its 20th anniversary, we take a look back at some of its defining milestones. Not in vain, the ECB has been the guarantor of the euro’s survival and, since 2014, the central axis of the euro area’s financial system. Since the onset of the 2008 financial crisis, the ECB took on a role that was pivotal for a huge part of the recovery. However, “it cannot act alone”: “further strengthening of Europe´s institutional and legal framework is necessary to construct a more united and resilient Europe to face future challenges.”
Every time Mario Draghi speaks at the news conference after the European Central Bank’s (ECB) monthly monetary policy meeting, the markets hold their breath. And after he finishes, they react. In the wake of the 2008 crisis, the expectations created by the bank’s message have taken on added relevance. BBVA Research is aware of the importance of being able to gauge if the ECB’s message adequately reflects its policy and has used big data techniques to this end.
The new accounting regulation IFRS 9 aims to buttress financial stability against future crises. It obliges financial institutions to more faithfully reflect credit risk and calculate provisions for insolvencies following an expected loss model (versus the previous “incurred loss” model). For a majority of financial institutions, this has resulted in an increase in provisions and the subsequent impact on capital.
The European Commission has presented its proposal on developing a new class of low-risk assets in the form of sovereign bond-backed securities (SBBS). The new security, whose goal is to enhance diversification and reduce sovereign bond risk in the euro zone, was included in the European Commission’s roadmap. The plan unveiled in December 2017 aims to deepen European Economic and Monetary Union.
Emerging economies were amongst the topics addressed at the Institute of International Finance’s (IIF) spring meeting, held in Brussels last week. This BBVA-sponsored event convened financial institutions, regulators and public bodies to debate some of the industry’s most pressing issues, including the economic and political outlook, regulation and fintech.
BBVA Research has raised its growth forecasts for US growth and now sees GDP at 2.8% this year and the next due to the strength of the global economy and the Trump administration’s fiscal stimulus.
Of the tax revenue paid by Europeans, only one euro per taxpayer is used to finance the EU’s budget. In total, the EU manages a budget of about 1% of the gross national income of its member states. Nonetheless, how this money is invested directly impacts Europeans’ lives; it is therefore of interest to understand the EU budget as of 2021, the first spending plan after the UK’s exit from the EU.
As expected, the European Central Bank left interest rates and its asset-purchasing program, or quantitative easing (QE), unchanged. After its policy meeting, Mario Draghi instead stressed concerns about the global risks posed by protectionism as well as the need to focus on inflation.
According to BBVA Research’s Latin America Economic Outlook report for the second quarter of 2018, the region’s positive trends of recent years are set to continue, with GDP growth forecasted at 1.4% for 2018 and 2.5% for 2019. However, BBVA’s study service has downgraded its 2018 growth forecast for the region by three tenths.
The Eurosystem is the monetary authority of the euro area. It comprises the European Central Bank (ECB) and the national central banks of the Member States whose currency is the euro. Its primary objective is the maintenance of price stability, and specifically, keeping inflation in the euro area (calculated based on internal stats of the ECB) “close to but under 2 per cent.”
The creation of a Single European Market without borders or customs duties is considered one of the greatest achievements of the European Union. The common market is now 25 years old and finds itself at a moment of crucial change in which digital disruption requires new products and services to be regulated.
Fears of a trade war between the U.S. and China are escalating by the day. Trump announced extra duties on 10% of Chinese imports and the two world powers have entered into a “tit-for-tat” trade retaliation that has unnerved investors and shaken financial markets. Nevertheless, the likelihood that these skirmishes will turn into a full-blown trade war are still low, as explained in a BBVA Research report.
Although the uncertainty surrounding Catalonia’s economic policy hasn’t had the expected negative impact, the favorable global environment seems to have offset the its negative effect on production and employment. Consequently, BBVA Research has upgraded its 2018 and 2019 GDP growth forecasts for Spain to 2.9% and 2.5% from 2.5% and 2.3% respectively. The report was presented today by Jorge Sicilia, Chief Economist of BBVA Group and Head of BBVA Research, Rafael Doménech, Head of Macroeconomic Analysis of BBVA Research and Miguel Cardoso, Chief Economist Spain and Portugal. Under this scenario, the country is expected to generate about 940,000 jobs over the two year period, causing the country’s unemployment rate to drop below 14%.
Europe and the U.S. need to promote global trade and services standards. And to do this, they must keep relying on multilateral agreements, which set out a strategic position with respect to third parties from a commercial, economic and political point of view. “The United States and Europe, united, are much stronger,” said José Manuel González-Páramo, Executive Member of the Board, Head of Global Economics, Regulation and Public Affairs at BBVA, in Barcelona on Monday.
“Our way is to help our customers take the best decisions.” In an in-depth interview with Actualidad Económica magazine, BBVA CEO Carlos Torres Vila explained the profound transformation that BBVA is undergoing. This is a process that is materializing in customized solutions to help the bank’s customers and clients achieve their vital goals, he added.
As we expected, the FOMC increased the Fed funds rate to 1.5%-1.75%, confirming that newly appointed Chairman is committed to maintaining continuity with his predecessor. The language in the statement underpinned the committee’s shift from a defensive to potentially offensive mindset, with strong labor market signals, increased business investment and firmer actual inflation readings.
Financial education is key to guaranteeing a sustainable and inclusive economy, creating an era of opportunity through digital transformation, asserts BBVA’s Executive Director responsible for Global Economics, Regulation & Public Affairs, José Manuel González-Páramo.
Over 300 businessmen Monday took part in a meeting in Bilbao of the Business 20 (B20) –a corporate forum of the G20. The companies present at the meeting are at the vanguard of digitalization and industry 4.0. At the start of the event, José Manuel González-Páramo, BBVA Executive Board member and vice president of one of the B20 task forces, called for “greater cooperation between the public and private sectors” to meet the challenges posed by the new digital economy.
Eight years have passed since the B20, known as the “Business G20”, met for the first times with the view of providing G20 leaders with proposals for more inclusive development. Since then a number of constructive policies have been put forward, although the main economic and social problems facing the world remain an unresolved challenge. The B20 has not only become a beacon throwing light on how to tackle these challenges, but also plays a crucial role within the G20. It is Argentina’s turn in 2018 to lead this mission.
The headlines about the U.S. dollar this year have underscored how complicated it is to predict the movement of any one currency in a global economy. They’ve gone from grim (“Dollar set for worst January in 30 years”) to triumphant (“Dollar claws back”) to deflated (“Dollar’s rebound fizzles”) in a matter of weeks.
On January 31st, the European Banking Authority (EBA) announced the formal launch of this year’s EU-wide stress test exercise of the euro area. It also unveiled the macroeconomic scenarios under which the exercise will be carried out. The adverse scenario implies a deviation of EU GDP from its baseline level by 8.3% in 2020, resulting in the most severe scenario to date. The EBA expects to publish the results of the exercise by 2 November 2018
Timothy Bresnahan, Ariel Pakes and Robert Porter study the impact of businesses in the market. To measure this ability that firms have to control prices in a given industry, the three Frontiers of Knowledge laureates in Economics have developed methods that have had a significant and lasting impact on empirical research in the industrial organization field, as well as in other applied fields like health or environmental economics.