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Spain | Residential demand starts the year with timid advances

March 19, 2019
The advance of the sale of homes in January was not enough to recover the declines of previous months, despite the positive tone of the determinants of demand. The INE Price Index showed a slight moderation of growth in 4Q18. In addition, permits fell in December in a context of greater uncertainty in the sector.

Market Comment | Steady markets pending this week’s FOMC meeting (preview)

March 19, 2019
Calm prevailed in the financial markets at the start of the week ahead of this Wednesday’s FOMC (see preview below). Moreover, the EU summit (at which it is expected to debate on the Brexit issue and Chinese trade relations), Brexit developments and key confidence indicators for several economies could also be drivers for markets.

Canary Islands Economic Outlook 2019

March 18, 2019
The economy of the Canary Islands would have grown by 2.5% in 2018. It is expected to advance by 2.4% in 2019 and moderate to 1.8% in 2020, linking seven consecutive years of economic recovery. This will add around 47,000 new jobs between the end of 2018 and 2020, but the unemployment rate shall be 18.6% in 2020.

China: managing slowdown and risks

March 18, 2019
On the opening day of the NPC, after predictably praising accomplishments in 2018 such as achieving the 6.5% growth target, Premier Li Keqiang hinted at concern and caution in the face of the high level of uncertainty.

The quest for balance in the Spanish pension system

March 18, 2019
The diagnosis of the system's current problems is well known. Since the start of the 2008 financial crisis, pension spending has increased by 4% on average annually, whilst earnings have stagnated—or even decreased—as a result of a 17% fall in employment.

Spain | The economy evolves at cruising speed in 1Q19 despite uncertainty

March 18, 2019
GDP growth in 1Q19 may stand between 0.6% and 0.8% QoQ. This is consistent with BBVA Research's forecast for 2019 (2.4% YoY). In any case, the risks and their possible realization during the coming months, put a downward bias on the scenario. Domestic demand leads the advance in activity while some components of foreign demand show signs of weakness.

Market Comment | Calm in markets during a week in which Brexit was the focus

March 16, 2019
It was a relatively calm week in the global financial markets. Economic data in the US reinforced the outlook of slight economic recovery with muted inflation pressure, supporting an accommodative monetary policy and gains in equity markets. Moreover, the Bank of Japan maintained its dovish stance, and showed concerns over global growth ahead of next week’s Fed meeting

Macroeconomic Effects of Taxes on Banking

March 16, 2019
This paper evaluates the macroeconomic effects of taxes on banking in a small open economy in a currency union for three tax alternatives: an additional tax on profits, on deposits, and on loans. We propose a DSGE model with a rich detail of taxes and a banking sector and show that these three taxes are equivalent in their effects on macroeconomic variables.

Financial Regulation: Weekly Update. 15 March 2019

March 15, 2019
Highlights: BCBS issues report on the interaction of regulatory instruments, and on crypto-assets. ECB issues statements on euro short-term rate. EU Council and Parliament agree on EMIR revision for CCP supervision. EBA issues clarification on API under PSD2 and report on high earners. FCA issues statements preparing for a no-deal Brexit

China | Sluggish growth at the beginning of the year

March 15, 2019
A batch of January-February economic indicators is announced, together with previously released trade and credit data, suggesting growth slowdown continues despite the recent easing measures and good progress of China-US negotiation. A couple of factors weigh on growth, including the faded effect of previous front-loading exports and dampened investors’ confidence.

Market Comment | Brexit uncertainty remains in financial markets

March 15, 2019
The main focus in the markets remains around Brexit developments and its potential impact on financial markets. In this context of uncertainty, GBP volatility is expected to remain. On another front, trade fears returned to the forefront after the US announced that the highly expected Trump-Xi Summit will be delayed beyond March.

Turkey: Economic activity "bottoming out" signals broaden

March 15, 2019
Turkish Industrial Production (IP) increased by 1% mom in seasonal and calendar adjustment terms in January after five months in a row of monthly negative contractions. Industrial Production contracted by 7.3% in year growth rates in line with our expectations but lower than consensus (-8% Consensus vs. -7.1% BBVA Research).

Market Comment | Brexit negotiations in the spotlight amid a wave of votes

March 14, 2019
Brexit negotiations remain in the spotlight amid a wave of votes in the UK Parliament, setting aside other significant issues such as trade negotiations between US and China, at least for now. For the moment, the impact of the Brexit issue on the markets has been concentrated only in UK assets.

The Government’s digital transformation: yes, it’s big, but it will never be slow again

March 13, 2019
GovTech is every technocrat’s dream. The extraordinary technological transformation we have seen in sectors such as financial services and retail trade has also reached the public sector. In a surprisingly short time, all types of interaction between the State and its citizens will be different.

Market Comment | Markets remained awaiting the outcome of the Brexit vote

March 13, 2019
Caution in markets with all eyes on the outcome of the UK Parliament’s vote on May’s Brexit deal later today. Yesterday, May agreed on a revised Brexit plan with the EU in a move to try and win the support from the Parliament, leading the GBP to appreciate. However, the GBP depreciated today after reports showed the assessment from the UK’s top lawyer over the “backstop”.

Country Risk Quarterly Report. First Quarter 2019

March 13, 2019
Global Risk Aversion experienced high volatility during the quarter, which was reflected mainly in equity markets, but not in sovereign CDS or emerging currencies markets. The improvement seen since the beginning of the year was favoured by the Fed's announcement of a more patient stance in its interest rate policy.

Market Comment | Quiet start to the week with Brexit in the spotlight

March 12, 2019
Calm in markets at the start of the week after the eventful last week in which the dovish stance of the ECB hit European markets, spreading abroad. Moreover, last Friday’s release of weaker-than-expected US job data reinforced the “patient” shift of the Fed. This week will be crucial for the Brexit issue while the US-China trade negotiations also remain high on the agenda

Turkey | Sharp adjustment of domestic demand in 2018

March 11, 2019
Turkish Economy contracted by 3.0% yoy in 4Q18, slightly worse than expectations (-2.5% median vs. -2.2% BBVA Research). The economy technically entered into a recession as the QoQ contraction became deeper with -2.4% after -1.6% in 3Q18. We maintain GDP growth forecast at 1% for 2019 as recent impulses and base effects in the 2H19 may balance the poor performance of 1Q19.

Extremadura Economic Outlook 2019

March 11, 2019
The GDP of Extremadura would have grown by 2.6% in 2018, 0.5 p.p. above the growth of 2017, and is expected to increase by 2.4% in 2019 and 1.9% in 2020. This will add around thirteen thousand new jobs between the end of 2018 and 2020 and the unemployment rate shall drop to 21.2%, still 5.8 p.p. above the 2007 minimum.

Looser monetary policy

March 11, 2019
Some kind of policy reaction to the weak tone of Europe’s economy was expected at the ECB meeting last week, in view of the delay in signs of recovery, particularly after the more downbeat tone adopted by members of the ECB Board.