BBVA Research

The strong downward revision of economic forecasts published by the European Commission last week had a substantial impact on the financial markets, leading to questions about whether the evident slowdown that we are currently experiencing could be more serious than previously thought and culminate in some kind of recession.

The CBRT decided to reduce the RRR in Turkish Lira and increase the upper limit of ROM facility for holding standard gold converted from wrought or scrap gold. Rather than considering the decision as an early sign of an interest rate cut, we perceive the decision as the logical response to stimulate credit but avoid a premature rate cut which could put credibility at risk.

Pemex buys time with financial support measures from the government, but the company’s credit rating continues at risk. To stabilize crude oil production and eventually increase it, the approved investment of MXN 273,000 million for 2019 should double and be mostly used for E&P.

Last week’s increase in volatility was overshadowed by the positive tone in financial markets on the back of optimism about global trade ahead of US-China trade talks. Cautious sentiment appeared  amid weak economic data but it was partially offset by today’s announcement of the extension of trade talks and the US Congress’ deal, which will avert another shutdown in the US

Highlights: EU ambassadors conclude CRDV negotiation. FSB issues its 2019 work programme. EMMI publishes summary of responses to Euribor consultation. EC issues list of countries with weak AML/CFT. EDPB issues opinion on data transfer. ESRB issues recommendations on reciprocation of large exposure limits. US Treasury issues statement on the US-EU Financial Regulatory Forum

The positive tone in markets faded after the release of disappointing economic data, while high-level US-China trade talks started today. The potential extension of the March 1st trade truce deadline continued to weigh on investors’ optimism on the trade relation developments. Meanwhile, today the US Congress will vote on the spending bill that will avoid another shutdown

Industrial Production (IP) surprised on the downside by falling 9.8% yoy in calendar adjusted terms in December (-8.4% BBVA Research vs. -7.5% Consensus). Thus, IP contracted by 7.5% in 4Q18 after its 1.6% growth in 3Q18. We maintain our view that the recovery in economic activity could start as of 2Q19 and bring the whole year GDP growth rate to 1% in 2019.

Financial markets continued with a positive sentiment driven mainly by the optimism on the US-China trade relationship and the potential to avert another US government shutdown. Hopes for an ease in trade frictions rose after Trump said that the March 1st deadline to increase tariffs on Chinesse imports could be delayed if progress is made during the upcoming trade talks

The improvement in tourism and consumption in the fourth quarter eases the slowdown in the Levante. However, the trend is still marked by an external context favorable to exports of goods and a lower dynamism of household spending.

The economy of Andalusia would have grown by 2.3% in 2018. The recovery will continue in 2019 and 2020, with a GDP growth of 2.3 and 1.9%. 140,000 jobs will be created by the end of 2020, although some risks are more likely now than a few months ago. The unemployment rate and unemployment will continue far from pre-crisis. Inclusive growth is a challenge.

The current infrastructure does not respond to the needs of its main demanders. New way of measuring railway efficiency in the face of a changing reality. Network model for the calculation of the coherence of the railway network. Railway network does not meet manufacturing needs. Railway incompatibilities point to investment opportunities.

Positive tone in markets after the announcement of a potential deal that includes some funding for the border in the US. This has somewhat allayed fears over another partial government shutdown ahead of this Friday’s deadline. Optimism on the US-China trade relationship ahead of high-level talks also weighed. On another front, Brexit negotiations continued to be uncertain

The economy of Aragon may have grown 2.6% in 2018, and will moderate to 2.4% in 2019 and 2.0% in 2020. It will create over 14,000 new jobs by 2020, although some risks are more likely to materialize now, than they were some months ago. Total employment will be still far from its pre-crisis level. Inclusive growth is a challenge.

The recovery of the Spanish economy will carry on in the coming years, although the slowdown in growth continues. GDP is expected to grow by 2.4% in 2019 and by 2% in 2020. In this context, job creation is expected to continue, in an environment of soft adjustment of world growth and growing internal and external uncertainty.

Although the U.S. maintains significant advantages such as the strongest military, the world’s reserve currency, the largest economy and the highest ranked universities, there are growing concerns that the country is losing the technological race.

Markets started the week on the front foot after last week’s increase in volatility. US-China trade talks later this week increased the optimism about a potential agreement ahead of the trade truce deadline. US politics are also in the spotlight amid a new potential shutdown. The release of the US CPI, German’s GDP and Brexit negotiations could also be drivers for markets

Global slowdown, increased global financial volatility and worsening commodity prospects will limit growth in the region, in addition to idiosyncratic factors. After growing 1.6% in 2018, the region will expand 2.1% in 2019 and 2.4% in 2020.

As with many questions, the answer depends on the context. Few things are better for social progress and welfare than a sustainable rise in wages resulting from increases in productivity, and for growth to be equitable and reach all workers.

Despite the slowdown seen during much of 2017 and consolidated in 2018, the GDP growth rate remained above that observed in the rest of the EMU, and even accelerated in the last quarter of the previous year.

Can economic policies contribute to the increase in demand? The scope for expansionary fiscal policies is limited, in some cases due to the high levels of debt and, in other cases, due to the need to comply with fiscal rules, or otherwise undermine their credibility.