The Eurozone is showing positive signs of growth and inflation. But the risk premium levels of the peripheral countries are still very high compared with those at the start of this year. In the short-term, they will move to the political beat, particularly any news on the French election.
Articles by Francisco López
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International organisations and the leading research departments are revising their growth forecasts upwards for the Spanish economy for this year and 2018. But at the same time, they note that Spain’s recovery is not reaching most wage earners.
Once again Mario Draghi followed the expected script: it kept interest rates at 0%, where they have been for the last year; it left the deposit facility unchanged at -0.4% and did not modify the debt purchasing programme.
The leading research departments have begun to make upward revisions to their forecasts for the Spanish economy in 2017 and 2018. The GDP figures confirm that our economy did not lose momentum in the final part of 2016 (in the end GDP grew 3.2% for the year as a whole). And the indicators on activity and confidence at the start of 2017 show a slight acceleration. The good performance from the labour market, and Spain’s competitive exports, will be key growth drivers.
Popular’s share price is very volatile and is up around 8% from its year lows, amid rumours that the only option for the troubled bank is to merge with another bigger lender.
The Social Security numbers over the last few years are really alarming. Although we still have not had any official confirmation, experts estimate that at end-21016 the system had a hole of nearly 18 billion euros, 40% more than in 2015, and almost six times over budget.
The last meetings of the Federal Reserve and the Bank of England have fuelled sharp moves in the major currencies. The euro has extended its year highs against the dollar (it’s over 1,08 against the greenback) and on Thursday it appreciated over 1.3% against the pound (the exchange rate is at 0,86). Is near a new “currency war”?
The Spanish economy grew at a rate of 3.2% in 2016, although signs of a slowdown are beginning to appear. Almost all the external factors which had boosted GDP growth latterly (the so-called tail winds) may disappear over this year.
The prolonged period of low interest rates in which we find ourselves has caused a complete shift in the mortgage market. Last year, coinciding with the key reference 12-month Euribor’s entry into negative territory, fixed rate mortgage loans represented over half the new loans contracted (53.3%), according to figures released by the Spanish Mortgage Association.
The 12-month Euribor, which is the reference used for the majority of variable rate mortgages in Spain, has been in an uninterrupted downwards trend since 2012 and is about to complete one year in negative territory. Analysts consensus is that the Euribor has already touched bottom, and that it will begin to rise gradually from the second quarter.