Saturday, December 15 2018 | ASIA TODAY INTERNATIONAL - Reporting the Business that Matters in Asia
Updated: 7 hours 50 min ago
Small and medium-sized enterprises (SMEs) form a fundamental part of the business fabric, in Spain and throughout the EU. They account for more than 90% of the total number of businesses in the EU, provide 70% of its jobs and contribute nearly 50% of its added value. For this reason any setback suffered can end up having consequences for economic growth and employment.
Output growth moderated in the past few months, but this should be transitory. As a result, economic activity would grow 3,6% in 2018. Next year, strong mining investment would drive output growth up to 3,9%. Hence, there are no changes in our forecasts, but we are now considering higher private sector spending and lower from the public sector.
Nonfinancial corporate debt-to-GDP is high, but debt-to-assets and debt-to-earnings remain moderate. Solid earnings, tax cuts and low real interest rates allow corporations to service their debt without problems. However, tighter financial conditions, a slowdown in profit growth and higher risk aversion will lead to higher debt distress and deterioration in credit quality.
Highlights: EBA publishes stress tests results. ESMA issues RTS preparing for a hard Brexit. ESAs consult on guidelines for AML/CFT and on changes to PRIIPs. Council issues conclusions on climate finance. OJEU publishes RTS on benchmark regulation. BdE issues financial stability report. US Agencies issue consultation to simplify regulatory reporting for small institutions.
The Spanish real estate market continues to perform well. Job creation intensified in October, confidence rose in September and financial conditions remain favourable. Home sales thus grew in August and, while approvals suffered a bit of a correction that month, residential investment has risen substantially in Q3 2018.
The main geopolitical hot spot has been the death of Saudi journalist Jamal Khashoggi in Saudi Arabia’s consulate. Major powers’ security strategies with regard to Syria are still unclear. The possibility of US to withdraw from INF Treaty increased the risks regarding European security. Merkel’s decision to step down as party chair also rose uncertainty in Europe.
Market volatility, rich equity valuations, inflationary pressures, a jolt of hawkish monetary policy and the length of the current expansion ratcheted up recessionary fears in 3Q18. Based on empirical evidence and our judgement on the potential for imbalances within the US economy, although the probability of recession within the next 12 months is edging up, it remains low
Modern retail sales will show a good performance in the remainder of this year and next. Later, with the demographic bonus, the increase in the purchasing power of households, and the growing access to digital media that will boost online sales, the sector has room to continue expanding.
The US unemployment rate in September was 3.7%, its lowest level for nearly fifty years, favouring employment of Mexican immigrants and remittances to Mexico. Employment of the population of Hispanic origin in the US continues its rising trend, surpassing 27 million people in employment in September.
As expected, Global investment funds registered net outflows for a 2nd quarter in a row. Withdrawals from EM continued while DM’s outflows were an unwelcomed surprise: those from Europe accelerated to a pace not seen since 2011. According to our baseline scenario (cyclical downturn, monetary policy normalization and volatility), outflows from EM are likely to remain
CPI increased by 2.67% in October (slightly higher than market & BBVA Research expectations of 2.5%). Annual consumer inflation maintained its upward trend by reaching 25.2%, up from 24.5% in September. We expect the inflation to come down to 23.5% at the end of 2018 on recent tax cuts on automobile and durable goods and lagged effects of current price discount campaigns.
Urbanization is global process. Cities are the engine of economic development, but their growth also generates costs. Facing these challenges requires the implementation of appropriate policies, taking advantage of the benefits of new technologies.
Highlights: BCBS issues progress report on Basel III implementation. EBA will publish stress test results, and issues guidance on management of NPEs. ECB issues its supervisory priorities. ESAs issue proposal for ECAIs. UK Treasury issues SI preparing for Brexit. US Agencies consult on regulatory requirements for large banks.