spain economic outlook quarter 2015 spain€¦ · see box 2 of spain economic outlook electric...

Spain Economic Outlook 2nd quarter 2015

Spain outlook

2nd quarter

2015


The Spanish economy continues to

accelerate and face an improvement in its

fundamentals, while the risks have still not

materialised.

Spain should take advantage of this situation

by making progress in reforms that enable it

to continue growing, even in less promising

scenarios


Global


USA Spain Eurozone EAGLEs China

Emerging Asia LatAm

2016

2016

0.6

2015

2015

Source: BBVA Research

Global

A weaker and more uneven recovery

2016 2015

2016 2015 2016 2015 2016 2015

Downward Maintained Upward

2016 2015

2016 2015

1.6 2.7 3.0 2.2 5.3 4.9 6.6 7.0

2.8 2.9

2.1 3.5 3.9 6.7 6.8

See: https://www.bbvaresearch.com/en/public-compuesta/global-economic-outlook-second-quarter-2015///

https://www.bbvaresearch.com/category/geografias/global/

https://www.bbvaresearch.com/en/public-compuesta/global-economic-outlook-second-quarter-2015/













https://www.bbvaresearch.com/public-compuesta/situacion-global-segundo-trimestre-2015/



Global GDP growth and BBVA-GAIN

forecasts

(QoQ, %)

• In Europe the upturn in activity is escalating

• In Latin America and Asia growth is losing momentum

• The slowdown in the

United States will be temporary

A weaker and more uneven recovery

CI at 20% GDP (% QoQ) CI at 40% CI at 60%

0

0 . 25

0 . 50

0 . 75

1 . 00

1 . 25

1 . 50

2 . 8 % annualised

Mar-15


USA: a temporary slowdown

USA

GDP growth (%)

• Rising employment

and low inflation are

underpinning household

income and consumption

• This will offset the dollar

appreciation and the

halting of external

demand


-3.0

-1.5

0.0

1.5

3.0

4.5

Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15

Annualised quarterly rate BBVA forecast


Differentiation among monetary policies

• Since January 2015 the central banks have taken: 27 decisions to

lower interest rates 2 decisions to raise

them Source: BBVA Research, Haver Analytics

Interest rate expectations (%, outlook one year ahead of interest rates by the

Fed and the ECB)

-0.15

0.00

0.15

0.30

0.45

0.60

0.75

Jan-13 Apr Jul Oct Jan-14 Apr Jul Oct Jan-15 Abr

FED ECB


Real effective exchange rate (YoY %, March-15)

Source: BBVA Research, BIS

QE is depreciating the euro and lower rates

• The cost of new loans to businesses has fallen within the Eurozone by 67 basis points in the last year to 2%

Negative values are currency depreciations

-15

-10

-5

0

5

10

1 5

E u r o D ol l a r

- 13%

12%


Changes in exchange rates against the dollar Dec14-April15

The exchange rate as a variable for adjustment

• The depreciation in the currencies of the emerging economies reflects their reliance on funding from outside

Source: BBVA Research, Bloomberg

Brasil

India

Turkey

Mexico

Colombia

Indonesia

South Africa

- 15.1

+ 0.3

- 15.5

- 4.4

- 6.3

- 3.9

- 4.2


Emerging

Markets Impact of Fed

normalisation

process


Europe Greece

What are the risks?

Global geo-

politics Middle East,

Russia/Ukraine

China Sharp correction

in activity

Increased risk

Maintained risk


Greece in the spotlight

• Little progress in the negotiations and strong liquidity pressures

• The scenario of a default

and/or Grexit is not in Greece’s interests

• Given a scenario of risk, the

impact in Europe would be more limited

Upcoming maturities of sovereign debt (EUR mM)


August

July

June

May 1

3.6

4.7

1.7


Spain


1.4

2014

2.7

2016


3.0

2015

Revision to the upside of growth in Spain

%

% %



• Growth is accelerating at around an annualised 4%

• A local maximum since 2008 and in line with the 2001-07 average growth

Revision to the upside of growth in Spain

GDP growth and MICA-BBVA forecasts 2nd quarter 2015 (%)

2Q15

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

CI at 60% CI at 20% CI at 40% GDP (%QoQ)

2009 2010 2011 2012 2013 2014 2015


Domestic demand and exports of services are driving growth

• Private consumption accounts for most of the growth

• Services exports and

M&E investment continue to boost internationalisation


Average contribution to GDP growth in

the last quarter

Private consumption

2.1 Exports of services

Investment in M&E

Other demand components 0.00

0.6

0.4

(Annualised quarterly growth rate)


Forward

The tailwinds are picking up

Greater euro depreciation

Fall of oil price

EMU

growth

revised

upwards


Source: BBVA Research with data from Bank of Spain

+8,6%

On the plus side:

Flows of new credit in 1Q15 The flow of new credit has surged ahead YoY % in 1Q15

Households Retail

11.6% SMEs*

9.9% 15.8%

* Loans of less than one million euros to companies



Risks

Tensions and policy uncertainty

UK General

elections

Greece Still in the spotlight

Ukraine Conflict with Russia continues

Italy Undergoing

reform process

Spain Election year

Portugal General

elections


Risks

Delay in reducing imbalances


-6,3

-5,5

-4,2

• The deficit for the regions widened in 2014

• Rigorous budget

implementation and credible plans are key

Autonomous Communities public deficit

(% GDP)

-1.5

-1.7 -0.14 -0.03

2 0 1 3

Revenues Expenditure

2 0 1 4

Target 2014

1.0%

See Box 4 of Spain Economic Outlook



Contribution to YoY GDP growth

• Even though the internationalisation process is unlikely to be reversed, the increase in domestic demand might slow it down

Risks

Less vigour in exports

Exports of goods Domestic demand

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0



Jobs creation (thousands)

• The unemployment rate will come down to around 20% by the end of 2016

• The reforms must be continued to carry on reducing unemployment

One million more jobs over 2015 and 2016

2010 20 1 1 2012 2013 2014 2015 2016

-382 -303

-788

-493

205

518 519


Challenge

Investing and bringing down borrowing

Net lending / net borrowing (% GDP)

• The investment recovery should not be accompanied by a drop in saving

• Progress in public

saving will be key in the upcoming years

Source: BBVA Research See Box 1 of Spain Economic Outlook

2007 2007 2009 2011 2013 2014 2015 2016

15

20

25

30

35

-10

10

-5

0

5

Left: Investment Saving

Right: Net lending / Net borrowing


Reform

Law of second chance

Appropriate regulation

Monitoring and evaluation

Improve credit for new projects

See Box 3 of Spain Economic Outlook


Challenge

Greater competition in the services sector

Regulation in services and inflation of

intermediate consumption in manufacturing

Deregulation vs. no deregulation, average • In the past, reforms

have helped to enhance competitiveness

• Reforms such as the

Professional Services Act are necessary

Source: BBVA Research See Box 2 of Spain Economic Outlook

Electric equipment

Transport equipment

Other manufactures

Textiles

Basic metals

Paper industry

Rubber and plastics

Chemical industry

Food industry

Non-metallic minerals

- 0 . 1 5

- 0 . 2 4

- 0 . 3 1

- 0 . 3 6

- 3 8

- 0 . 4 0

- 0. 4 4

- 0. 4 8

- 0. 5 0

- 0 . 6 8

0.


Conclusions


• The economy will create around 1 million jobs in 2015 and

2016

• Advantage should be taken of this environment to make

progress in reforms which make it possible to continue to

grow, even in less favourable scenarios

• Increasing domestic saving and improving regulation to

increase investment and reduce external borrowing, a

challenge for the Spanish economy


The Spanish economy continues to

accelerate and face an improvement in its

fundamentals, while the risks have still not

materialised.

Spain should take advantage of this situation

by making progress in reforms that enable it

to continue growing, even in less promising

scenarios

spain economic outlook quarter 2015 spain€¦ · see box 2 of spain economic outlook electric...

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