BBVA Research | For 2017, the economic cycle is expected to continue correcting the deterioration in Spain’s public accounts, but in a scenario without changes in fiscal policy, the shortfall would decline only to 3.6% of GDP, and would exceed the budgetary target set at 3.1%. Further adjustments will be required to ensure a durable correction.
Mari Pinardo | Do you remember the summer of 2012, when Spain’s risk premium reached a record high of no less than 638 basis points? Four summers later, this spread seems like it belongs to a completely different country. Since that fateful summer, Spain’s sovereign risk has declined nearly 550 bp and just last week broke the 100 bp threshold. There are basically three reasons which have pushed the risk premium through the 100 bp threshold: a date for Spain’s caretaker Prime Minister Mariano Rajoy’s investiture, the economic policies which have been in place in the Eurozone since April 2015 and the fact that it looks less likely the Fed will raise interest rates in September.
F. Barciela / F.G. Ljubetic |The news that a UK bank and a German lender are going to start charging clients for their deposits has raised the question of whether Spanish banks are thinking of doing the same. For the time being this deposits’ charge will generally apply to very specific segments of client business. The continued decline in margins at the Spanish banks is worrying; a consequence of the fact that interest rates on loans are increasingly lower while the remuneration costs on liabilities are maintained. In the end, the Spanish banks may not have any option but to bite the bullet…and charge for deposits.
Spain’s trade deficit in the first half to June 2016 dropped 31.4% to 7.878 billion euros from a year earlier, driven down by record exports, according to data published on Friday by the Economy Ministry.
José Luis M. Campuzano (Spanish Banking Association) | Spanish lenders’ bad loans fell 18.2% to 118.159 billion euros in June from a year earlier, registering their lowest level since 2010, according to the Bank of Spain.
No day goes by without us being told how wonderful this year’s tourism campaign is going to be, in terms of the millions of visitors and the billions of euros it will generate. The tourism campaign is focused on the third quarter, when everyone and their aunt is getting sunburnt. There are many more jobs, workers are needed, and this is reflected in the increase in the number of hours worked, normal and extra.
F.Barciela / F.G. Ljubetic | Just as was expected, the ‘Opportunity Funds’ (or Vulture Funds as they are referred to) are starting to unwind positions and leave Spain: good news, because it shows that the days of bargains are over as the country is firmly on the road to recovery. But the fact these funds are leaving Spain doesn’t mean they will not have other opportunities. Now they are betting on countries like Brazil, Greece, Italy or Puerto Rico.
J. L. Martínez Campuzano (Spanish Banking Association) | There are very few doubts about the basic strength of the Spanish economy at the moment, in line with relevant data. But there is one statistic published recently which deserves some special attention, namely that related to Bankruptcy Proceedings in Q2.
Mari Pinardo | Insurance companies, particularly the European ones, are up against a rock and hard place due to the low interest rate environment, the need to look for long-term profitability, the lack of investor appetite and the impact of Brexit on European fixed income markets. This backdrop, coupled with the high level of fragmentation in the sector in Spain, is likely to lead to more consolidation in the short-term.
F.Barciela /F. G. Ljubetic | If the banks are still the protagonists in terms of granting mortgages to private individuals, another thing is new developments where their role is decreasing. Burned by what happened in the past, the banks are looking very closely, and selectively, at each new development proposal. This has meant that in the last few years alternative financing formulas have emerged which property developers are using to push ahead with their projects.