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BBVA Research | Geo-World: Conflict & Social Unrest

BBVA Research | Geo-World: Conflict & Social Unrest

Spain’s GDP could contract 11.5 percent in 2020 and grow seven percent in 2021, according to the latest ‘Spain Economic Outlook’ report, which was presented this Tuesday by Jorge Sicilia, Chief Economist at BBVA Group and Director of BBVA Research; Rafael Doménech, BBVA Research Head of Economic Analysis; and Miguel Cardoso, BBVA Research’s Chief Economist for Spain. The contraction that is expected in 2020 represents a downgrade from the previous report’s forecast, which estimated an eight percent drop in GDP this year. The downward revision is mainly due to the fact that lockdown measures were in place longer than anticipated and these restrictions had a greater impact on demand, like in other European countries. Still, the reduction in number of COVID-19 infections and the easing of restrictions has led to a strong recovery. The ambitious policy announcements in Europe and a significant fiscal stimulus in Spain reinforces the expectation that this trend will continue. Even so, the risks continue to tilt to the downside in a climate of continued heightened uncertainty.

According to last week’s data on credit and debit card spending, consumption has recovered in regions where pandemic restrictions have been lifted. This improvement is observed in the U.S., Turkey and Spain, and in recent days in Latin America. In Spain, increased spending has been seen in those regions that first moved into phase two of the country’s reopening. BBVA Research points out that there was also an increase in ATM cash withdrawals.

BBVA Group executive chairman Carlos Torres Vila and BBVA CEO Onur Genç participated in a virtual Live@BBVA event with more than 65,000 connections from employees. They provided answers to questions about how BBVA is dealing with the coronavirus crisis and sent a message of hope. “Together we can ensure that the recovery is stronger,” the chairman said. “It is time to step up and make a difference,” and to do so, “ “it is essential that we all – authorities, companies and society a whole – act in a coordinated manner.”

The spread of coronavirus to several countries has led to a very charged reaction in the markets. The World Health Organization’s declaration of a global COVID-19 pandemic led to a number of immediate actions from the central banks and, concretely, the European Central Bank (ECB), as well as governments and other authorities in Europe. In a note, BBVA Research indicates that “the adoption of these measures is positive.” However, it feels that the monetary policy measures should be accompanied by a coordinated fiscal response from the European Union, which has already begun to materialize in Europe with similar stimulus plans between different countries.

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The B20 – or “G20 for businesses” – is a forum of private international companies that provides recommendations to the G20 to address the most relevant challenges of the global economic and financial agenda. This year, Saudi Arabia will preside over the meeting. BBVA has played a very active role in the B20 since 2015, thanks to BBVA Executive Board Member José Manuel González-Páramo, who serves as Vice Chair of the Finance and Infrastructure Task Force.

This year marks the 50th anniversary of the World Economic Forum, popularly known as the Davos Forum. The event kicks off on January 21 in the Swiss district of Davos-Klosters. For half a century, this forum has brought together politicians, businesspeople, and representatives from social and cultural organizations in order to find solutions for the world’s problems. 2020 sees the launch of a new ‘Davos Manifesto’ with the single objective of building a more sustainable, inclusive world.

According to BBVA Research’s latest Country Risk Quarterly Report, financial tensions have eased across all regions, markets, and asset classes with the exception of Latin America. Emerging Asia is the only region where all variables for the macroeconomic vulnerability radar analysis stand below their corresponding risk thresholds. Between 2018 and 2019 there were no significant changes to the degree of macroeconomic vulnerability across all developed economies, whereas within emerging regions, changes were concentrated in Latin America.

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BBVA’s Executive Board Member, José Manuel González-Páramo, discussed the current status and outlook for the global economy at the 24th S’Agaró Economic Symposium. His main message was that: “The deceleration of the global economy seems to be stabilizing”, with growth close to its potential. He therefore ruled out the “risk of recession”, which “is not the base scenario in the short-term.”

In recent months the world has witnessed an escalation of the U.S. – China trade war, with announcements of more restrictive and retaliatory measures. According to José Manuel González-Páramo, Executive Director and Global Head of Economics and Institutional Relations at BBVA, given this climate of global uncertainty, it is essential to build new bridges and establish areas for cooperation.

According to the latest Economic Outlook published this week by BBVA Research, GDP growth has decelerated in 2Q2019, but a rebound in consumption should support moderate growth rates in 2H2019. Survey-based investment indicators are also declining amidst deteriorating business expectations. In addition, countervailing trade dynamics — weaker global growth versus reduced trade tensions — imply there will be no material change in the net export balance.

We live in times of rapid change. And in this age of change, we refuse to just sit with the audience as mere spectators; we want to be in the spotlight, we want to play a leading role in this digital revolution, in this reality that demands us to be able to quickly adapt. It is in this context of relentless transformation that has prompted BBVA Research to launch new website: more user-friendly, with expanded features and a responsive design that adapts to any browsing device.

Thanks to DiGiX 2018, BBVA Research’s multidimensional digitization index, it is possible to compare which countries are the most advanced in this area, and discover their strengths and weaknesses. The index analyzes the economies of 99 different countries.  Top in the ranking are Luxembourg, the U.S. the Netherlands, Singapore and Hong Kong, while Malaysia, South Africa, Chile and Costa Rica are regional leaders.

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All eyes were on the possibility yesterday that the European Central Bank (ECB) could make changes in the forward guidance on rate and on a potential announcement of new liquidity measures. And Mario Draghi didn’t disappoint: he answered both questions. He announced that the ECB will keep interest rates on hold until at least the end of this year and another series of auctions of long-term liquidity. BBVA Research has just released an ECB Watch report covering and assessing the measures announced by Draghi.

The Eurozone finance ministers recently approved the appointment of Ireland’s Central Bank Governor,  Philip Lane, as the next chief economist at the European Central Bank (ECB). Alongside the central bank’s president and the members of the Executive Board, which will also see new appointments this year, the chief economist plays a key role on the institution’s Governing Council. According to BBVA Research, this year’s scheduled turnover at the bank, may result in changes to the ECB’s current stance on monetary policy.

Rafael Doménech, Jorge Sicilia y Miguel Cardoso, de BBVA Research

BBVA Research maintains its forecasts of 2.4% growth in Spain in 2019 and 2% in 2020, according to the latest report, Spain Economic Outlook. The report was presented today by BBVA Research Director and BBVA Group Chief Economist  Jorge Sicilia, and Rafael Doménech, the Head of Economic Analysis at BBVA Research. BBVA Research indicates that the recovery will continue, although the trend toward moderated growth is expected to consolidate over the coming quarters. Should this forecast be confirmed, the economy could add around 800,000 jobs over the next two years. This would represent a decrease in the job creation rate, but lower unemployment to 12.6% in 2020.

The slowdown taking place in some economies, protectionism, uncertainty over economic policy, an abrupt adjustment in China and rising debt are some of the issues that threaten to provoke another global economic crisis, one that would impact some regions more than others. “The general perception is that we are now past the peak in the cycle of growth of recent years,” says Rafael Doménech, the Head of Economic Analysis at BBVA Research.