Your SlideShare is downloading. ×
0
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Global and Spanish Economic Outlook 1Q13
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Global and Spanish Economic Outlook 1Q13

182

Published on

The perception regarding the prospects of the global economic scenario has improved as a result of a relaxation of financial tensions, particularly in Europe, and the last-minute agreement to …

The perception regarding the prospects of the global economic scenario has improved as a result of a relaxation of financial tensions, particularly in Europe, and the last-minute agreement to side-step the fiscal cliff in the US.
To sustain the recovery, appropriate policies must be adopted in both the US and the euro area.
Without ruling out upside surprises, the risks remain tilted to the downside, although they appear less likely now and should have a smaller impact.
Spain: caution due to existing risks. In 2013, the economy should bottom out, paving the way for economic growth in 2014.
Therefore it is vital to take advantage of the window of opportunity that has opened up to push through reforms that shore up the improvement in confidence.

Published in: Economy & Finance
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
182
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
4
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. Outlook for the Global Economyand for Spain13 February 2013
  • 2. Global and Spanish Economic OutlookKey themes1 The perception regarding the prospects of the global economic scenario has improved as a result of a relaxation of financial tensions, particularly in Europe, and the last-minute agreement to side-step the fiscal cliff in the US.2 To sustain the recovery, appropriate policies must be adopted in both the US and the euro area.3 Without ruling out upside surprises, the risks remain tilted to the downside, although they appear less likely now and should have a smaller impact.4 Spain: caution due to existing risks. In 2013, the economy should bottom out, paving the way for economic growth in 2014.5 Therefore it is vital to take advantage of the window of opportunity that has opened up to push through reforms that shore up the improvement in confidence. Page 2
  • 3. Global and Spanish Economic OutlookContentsSection 1Global economy:economic outlook improvesSection 2Spain: will recovery start in 2013? Page 3
  • 4. Global and Spanish Economic OutlookThe perception of the global economic scenarioimproves The ease in financial stress drives an improvement in global economic activityBBVA financial stress index BBVA-GAIN and World TradeSource: BBVA Research Source: BBVA Research based on CPB data3.0 3.0 3,0 12,02.5 2.5 2,0 6,02.0 2.0 1,01.5 1.5 0,0 0,01.0 1.0 -1,0 -6,00.5 0.5 -2,00.0 0.0 -3,0 -12,0-0.5 -0.5 -4,0 -18,0-1.0 -1.0 -5,0-1.5 -1.5 -6,0 -24,0 Feb-08 May-09 Mar-10 Feb-13 Jun-06 Jun-11 Apr-07 Apr-12 Jan-06 Jan-11 Sep-07 Dec-08 Oct-09 Sep-12 Nov-06 Jul-08 Nov-11 Aug-10 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 World Trade (3m MA) GAIN (right) US Eurozone Page 4
  • 5. Global and Spanish Economic OutlookThe perception of the global economic scenarioimprovesGlobal economic growth (%)Source: BBVA Research 6 5,1 6 5 3,9 4,1 5 Improved confidence boosts activity 3,2 3,6 4 4 2,8 3 3 2 2 Progress in governance in Europe and further agreements on the US fiscal deficit are necessary 1 1 conditions for recovery 0 0-1 -1 -0,6 The most extreme risk scenarios are less likely now-2 -2 thanks to the response by economic policies 2008 2009 2010 2011 2012 (f) 2013 (f) 2014 (f) Developed economies Emerging economies Baseline Feb-13 Baseline Nov-12 Page 5
  • 6. Global and Spanish Economic OutlookBrighter prospects for emerging economiesChina: GDP growthSource: BBVA Research4,0 14,0 Improved prospects for the Chinese economy provide3,5 12,0 support to the global economy3,0 10,02,5 Investment, backed by stimulus measures, and 8,0 exports to the rest of Asia and the US are behind2,0 Chinas renewed growth 6,01,5 4,0 Mid term, consumption must take over as a growth1,0 driver in China0,5 2,00,0 0,0 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 % qoq, Seasonally adjusted % yoy Page 6
  • 7. Global and Spanish Economic OutlookThe US weathers the impact of fiscal uncertaintyUS: economic policy uncertainty indexSource: BBVA Research based on data from PolicyUncertainty.com 250 2,500 Economic policy uncertainty has not prevented financial stress from easing… 200 1,500 …enabling private consumption to continue growing at near pre-crisis levels 150 ,500 Extraordinary monetary expansion counterbalances 100 -,500 the potential impact of fiscal uncertainty on economic performance 50 -1,500 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Policy uncertainty (left) Financial Stress (right) Page 7
  • 8. Global and Spanish Economic OutlookEMU: lower perception of risk with progress towards abanking unionEuro area: economic policy uncertainty indexSource: BBVA Research based on data from PolicyUncertainty.com What has happened since last summer?250 2,5 1. The ECB says it is “ready to do whatever it takes” to preserve the euro200 1,5 2. Second Greek bailout: a decisive movement against euro break-up risks150 0,5 3. EU council: decisive and continuous steps towards a100 -0,5 banking union Policy uncertainty (left) Incertidumbre de las políticas (izquierda) Financial stress (right) Tensiones financieras (derecha) 50 -1,5 -> capital flows back to Europe, and not only to Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 peripheral countries; financial stress eases Page 8
  • 9. Global and Spanish Economic OutlookEMU: lower perception of risk with progress towards abanking union Fiscal union Banking union Since the December summit, progress towards a Single regulator and supervisory body in 2014 fiscal union has been delayedThe "Treaty on Stability" and the "Six pack" appear to Single resolution mechanism and direct be sufficient for now… recapitalisation to be developed in 2013… …without debt mutualisation commitments or …without commitments to implement an European additional budget controls deposit guarantee fund Page 9
  • 10. Global and Spanish Economic OutlookEMU: lower perception of risk with progress towards abanking unionDespite advances, Europes banking markets remain highly fragmented BBVA composite bank fragmentation index Net balance with the Eurosystem (€ Bn) Source: BBVA Research Source: BBVA Research based on Bloomberg data6 1200 12005 1000 10004 800 800 Periphery 600 6003 Core 400 4002 200 200 0 0 1 -200 -2000 -400 -400 -600 -600-1 -800 -800-2 -1000 -1000 Jan-07 Apr-07 Jul-07 Oct-07 Jan-09 Apr-09 Jul-09 Oct-09 Jan-11 Apr-11 Jul-11 Oct-11 Jan-10 Apr-10 Jul-10 Oct-10 Jan-08 Apr-08 Jul-08 Oct-08 Jan-12 Apr-12 Jul-12 Oct-12 -1200 -1200 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 * Components: (i) coefficient of variation across countries on the interest rate of loans to businesses and households (average) (ii) TARGET2 balance (iii) Eurosystem liquidity as a percentage of bank assets, (iv) interquartile range of 2-year bond yields. To combine the indicators, we normalise and estimate each based on principal components. Page 10
  • 11. Global and Spanish Economic OutlookRisk factors to the global scenario Achievement of budget deficit targets Eurozone Adoption of banking union and Cyprus bailout agreements Election uncertainties US Agreements pending: automatic public spending cuts and debt ceiling Geopolitical pressure, especially in North Africa and the Near East Other global risks Slowdown in China and other emerging economies Page 11
  • 12. Global and Spanish Economic OutlookGrowth looks set to remain unevenGDP growth (% yoy)Source: BBVA Research A three-speed world8 8 5,8 6,1 There is still a high dispersion in growth rates6 6 4,14 3,6 4 The EAGLEs have proven to be crisis-resistant, 1,8 2,3 reinforcing the "new normal” paradigm2 1,3 2 0,30 0 Euro area: brighter prospects, but recovery will be slow, uneven and vulnerable-2 -2 2013 2014 2013 2014 2013 2014 2013 2014 World USA Eurozone Eagles Feb-13 Nov-12 Page 12
  • 13. Global and Spanish Economic OutlookContentsSection 1Global economy:economic scenario improvesSection 2Spain: will recovery start in 2013? Page 13
  • 14. Global and Spanish Economic Outlook2012 topped forecasts in springSpain: GDP growth and MICA-BBVA forecasts (% qoq)Source: BBVA Research based on INE data1,5 1,5 In spring, 28.6% of analysts polled expected Spanish1,0 1,0 GDP to contract more than 2.1% in 2012 (50% between 1.4% and 1.8%)0,5 0,50,0 0,0 Although the pace of decline accelerated in 4Q12, the second half of 2012 beat expectations-0,5 -0,5-1,0 -1,0 Available data point to a negative growth in 1Q13, but not as severe as in 4Q12-1,5 -1,5 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 CI at 60% CI at 40% CI at 20% Point estimate Data Page 14
  • 15. Global and Spanish Economic Outlook 2012 topped forecasts in spring Fiscal adjustment and economic growth 1. Lower-than-expected multiplier (I) Source: BBVA Research based on IMF data 8 SWE 6 Fiscal adjustment has been considerable, but GDP has DEU not responded as expected. Potential reasons:GDP growth forecast error 4 FIN MLT POL BEL 2 CHE AUT CZEFRAITA IRL 1. Spending has been cut with a low multiplier at CYP ISL times of financial stress 0 NLD ESP BGRHUN GBR DNK NOR SVK -2 PRTSVN 2. Certain measures have been construed as being -4 ROM temporary -6 GRC -8 3. Fiscal adjustment has come alongside compensatory -3 -2 -1 0 1 2 3 4 5 6 measures (supplier payment plan) Forecast fiscal consolidation (% of potential GDP) Page 15
  • 16. Global and Spanish Economic Outlook2012 topped forecasts in springFiscal adjustment and economic growth 1. Lower-than-expected multiplier (II)Source: BBVA Research based on IMF data 8 SWE Fiscal adjustment has been considerable, but GDP has 6 not responded as expected. Potential reasons: 4 FINMLT GDP growth forecast error POL BEL 2 CHE AUT 1. Spending has been cut with a low multiplier at CYP CZEFRAITA ISL IRL times of financial stress 0 NLD ESP BGRHUN GBR DNK NOR SVK -2 PRTSVN 2. Certain measures have been construed as being -4 temporary -6 -8 3. Fiscal adjustment has come alongside compensatory -3 -2 -1 0 1 2 3 4 5 6 measures (supplier payment plan) Forecast fiscal consolidation (% of potential GDP) Page 16
  • 17. Global and Spanish Economic Outlook2012 topped forecasts in springEU: cumulative growth of exports and unit labour 2. Higher external demand (I)costs, 1Q08-3Q12 (%)Source: BBVA Research based on Eurostat data 30 EE Exports show increasing diversification of 25 destinations and products 20 SK 15 ESP Better price competitiveness explains part of this DEU MTExports growth IRE trend, but other determinants are more important 10 NLD PRT EMU EU 5 BEL FRA 0 AUS LUX The rise in exports has not been accompanied by any ITA CY SI increase in imports, unlike at other times in the past -5 -10 FIN -15 -10 0 10 20 Unit labour costs growth Page 17
  • 18. Global and Spanish Economic Outlook2012 topped forecasts in springSpain: current account and ULCs, 1Q08-3Q12Source: BBVA Research based on Eurostat data 2. Higher external demand (II)Change in the current account balance over GDP (pp) 15 EE Higher exports and lower imports have produced a IRE sharp improvement in the external imbalance 10 SP PRT SK CY SI MT 5 NLD Lower ULCs make Spanish products more competitive vis-à-vis imports EMU EU ITA DEU 0 FRA AUS BEL LUX Reinforce the feedback factor: improvement in price competitiveness and the other determinants -5 FIN -10 -10 0 10 20 30 Unit labour costs growth (%) Page 18
  • 19. Global and Spanish Economic Outlook2012 topped forecasts in springSpain: real wages, employment and GDP(cumulative % change, SWDA data, %) 3. A more efficient labour market?Source: BBVA Research 4 Labour market reform and the 2nd Agreement on Employment and Collective Bargaining have 2 prevented further job destruction 0 While more data are needed to identify the factors undermining employment and GDP…-2 …trends in real wages and other variables are-4 consistent with a more efficient labour market-6 Real rem. LFS GDP Real rem. LFS GDP per employment per employment employee (swda) employee (swda) 4Q08-3Q09 1Q12-4Q12 Page 19
  • 20. Global and Spanish Economic Outlook2013: the year the economy should bottom outSpain: domestic demand, exports and imports(4Q2007=100)Source: BBVA Research based on INE data130 Slight improvement in forecast GDP for 2013, with a 1.1% contraction, due to the knock-on effect of Exports 2012115 Highly mixed performances by exports, domestic demand and imports -> a dual economy for firms100 Significant reduction in the current account deficit Domestic demand 85 Imports 70 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Page 20
  • 21. Global and Spanish Economic Outlook2013: the year the economy should bottom outRegional growth forecasts for 2013 (%)Source: BBVA Research based on INE data 0,0 Growth across Spains regions should also remainGDP growth in 2013 (%) BAL uneven -0,4 BASC CANA RIO MAD -0,8 GAL CYL Differences in regional growth marked by fiscal EXT CANT adjustment and net trade… ARA SPA AST -1,2 CAT NAV …although adjustment in the northern and central CLM regions of Spain is approaching to the end -1,6 AND MUR VAL -2,0 -2,8 -2,4 -2,0 -1,6 -1,2 -0,8 -0,4 0,0 GDP growth in 2012 (%) (*) The 45º line indicates the same growth in 2012 and 2013 Page 21
  • 22. Global and Spanish Economic Outlook2013: the year the economy should bottom outSpain: unemployment rate (%)Source: BBVA Research2927 The unemployment rate should peak during 201325 A smaller active population and improved GDP should23 allow the unemployment rate to ease slightly in 20142119 Additional measures and reforms are needed to reduce unemployment faster1715 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 SWDA data Raw data Page 22
  • 23. Global and Spanish Economic Outlook2014: the start of recoverySpain: balance of payments and capital flows(Cumulative 12-month, % of GDP) 1. Gradual improvement in foreignSource: BBVA Research, based on Bank of Spain data confidence in the Spanish economy 40 4 35 34,6 33,7 34,3 30 3 A better current account balance reduces the need 29,5 25 20 2 for external borrowing… 15 10 1 5 0 0 …which should reduce the dependence on ECB -5-10 -1 finance…-15-20 -2-25-30 -3-35 …and improve foreign perception of the Spanish-40 -4 economy, driving down risk premiums Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12(e) Dec-13(e) Dec-14(e) Jul-11 Jul-12 Eurosystem Rest FDI inflows Current account (as a residual; includes Errors and Omissions; rhs) Page 23
  • 24. Global and Spanish Economic Outlook2014: the start of recoverySpain and the EMU: GDP growth (% yoy)Source: BBVA Research based on Eurostat and INE data 2. Higher growth in the EMU4.03.0 Brighter prospects for the EMU also bode well for Spain:2.01.00.0 1. Higher confidence and lower financial stress-1.0-2.0-3.0 2. Higher external demand-4.0-5.0-6.0 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Spain EMU Page 24
  • 25. Global and Spanish Economic Outlook2014: the start of recoverySpain: exports and investment in equipment andmachinery (2008=100) 3. Improvement in private investmentSource: BBVA Research based on INE data140 Brighter prospects for the EMU, continued130 growth in exports...120110 ...and reduced financial stress...1009080 …should feed through to a recovery in private sector investment7060 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Goods and services exports Equipment and machinery investment Page 25
  • 26. Global and Spanish Economic Outlook2014: the start of recoverySpain: forecasts for the real estate sector(% versus average 2004-2007) 4. Smaller negative impact of ongoingSource: BBVA Research based on Works Ministry and INE data adjustments (I):5045 The supply-side correction in construction should end40 in 20143530 Public sector cuts should be less severe than the25 undertaken in 2012 and the forecast for 2013201510 The banking sector restructuring will be further along 5 0 Started houses Finished houses Housing investment (% GDP) 2013 (f) 2014 (f) Page 26
  • 27. Global and Spanish Economic Outlook2014: the start of recoveryPublic administrations: decomposition of the budget 4. Smaller negative impact of ongoingdeficit excluding financial sector aid (% of GDP)Source: BBVA Research, based on MINHAP data14 adjustments (II):12 Fiscal consolidation is working: budget cuts in 2012 will surpass 4pp of GDP10 2.6 4.3 8 2.0 3.3 2014 will not require as great an effort as in 2013 and 2012 6 -0.2 1.1 9.0 4 7.2 Overall, there are still major reforms to be 5.9 undertaken, that would increase the efficiency of the 4.6 2 public administrations 0 Pasive Fiscal Deficit Pasive Fiscal Deficit Pasive Fiscal Deficit fiscal effort 2012 fiscal effort 2013 fiscal effort 2014 policy policy policy Deficit 2012 2013 2014 2011 Page 27
  • 28. Global and Spanish Economic Outlook2014: the start of recoverySpain: Private sector credit (€Bn, trend)Source: BBVA Research, based on Bank of Spain data 4. Smaller negative impact of ongoing 350 adjustments (III): Assessment of the MoU: bank restructuring is well 300 underway 250 Deleveraging and economic recovery: credit for productive investment and job creation 200 Areas for improvement: (1) lending to SMEs 150 (2) increased data on credit flows 100 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 New loans Loan repayment Page 28
  • 29. Global and Spanish Economic OutlookA window of opportunity that must be seized The baseline scenario is highly sensitive to finance conditions in international markets, while numerous risks persist Efforts to achieve permanent improvement of markets and take advantage of it, unlike in the past Europe should progress towards a more genuine EMU. For this, progress towards the banking union in 2013 and funds to spearhead growth are crucial. Spain must extreme efforts with the ongoing adjustments and structural reforms required to boost the competitiveness of its economy Page 29
  • 30. Global and Spanish Economic OutlookKey themes1 The perception regarding the prospects of the global economic scenario has improved as a result of a relaxation of financial tensions, particularly in Europe, and the last-minute agreement to side-step the fiscal cliff in the US.2 To sustain the recovery, appropriate policies must be adopted in both the US and the euro area.3 Without ruling upside surprises, the risk of global uncertainty remains tiled to the downside, although the risks appear less likely now and with a smaller impact.4 Spain: caution due to existing risks. In 2013, the economy should bottom out, paving the way to begin growing again in 2014.5 Therefore it is vital to take advantage or the window of opportunity that has opened up to push through reforms that shore up the improvement in confidence. Page 30
  • 31. Outlook for the Global Economyand for Spain13 February 2013

×