BBVA Research will revise down its growth forecast for Spain this year

MADRID, 7 Jul. (EUROPA PRESS) -

BBVA Research will lower its growth forecasts for the Spanish economy next week, as anticipated by the bank's president, Carlos Torres Vila, during the business meeting organized this Thursday by CEOE and Cepyme.

Last April, BBVA Research cut its forecast for Spanish GDP growth in 2022 by 1.4 points, to 4.1%, and lowered the estimated growth for 2023 by 1.6 points, to 3.3%. mainly because of the impact of the war in Ukraine.

On July 14, BBVA Research plans to publish its new macroeconomic forecasts. "The growth forecast that we have now is 4.1%, but our study service is going to make a new forecast that will be lower than this," Torres Vila revealed.

During the business meeting, the president of BBVA reviewed the current context and recalled that the economy was recovering strongly from the coronavirus with some inflationary tensions that, at the time, were described as transitory.

Although Torres has stated that the second quarter will still show significant growth, with the recovery of the tourism sector, he has recognized that the invasion of Ukraine "disrupts" the short-term macro outlook and also has long-term repercussions.

"What is happening to us is a consequence, to a large extent, of that invasion and part of the damage that we all suffer as a society has to do with the war situation. This is a war and we have chosen to fight it, which I think is what correct", explained Torres, who pointed out that the tensions that this situation has caused in energy and supply chains have also added to the confinements in China.

In this scenario, inflation is rising sharply and, although BBVA expects it to "mode down a little", the forecasts continue to rise each month. "The latest forecast of the Studies Service is an inflation of 7%, but with increasingly upward biases. This has the repercussion of impoverishing society," she pointed out.

Torres then referred to the response that central banks are giving to this situation, raising interest rates, which are "a clear tool" to anchor inflation expectations and moderate demand given the price situation.

Although the manager believes that raising rates "is what needs to be done", it will cause lower growth and will make the forecasts for the Spanish and European economy "worse than a few months ago". In this line, it has advanced that BBVA Research will lower its growth forecasts for the Spanish economy in its next revision.

During his speech, the BBVA chairman defended that decarbonisation should not be seen as a cost, but rather as "a great opportunity" that requires a high volume of investment that will only come if it makes economic sense.

"The good news is that we already have a lot of business case and we have to make it take advantage of it. We have a great immediate opportunity to make investments that help us decarbonize those that make economic sense and, those that do not make economic sense, they will have if we all do the right thing so that the incentives are correct and that investment makes economic sense", he maintained.

In this sense, the president of BBVA has pointed out that if Europe were decarbonized, it would be in a better position to respond to the war due to the invasion of Ukraine by Russia. "I think that Russia's actions would have been very different if we were decarbonized. Short-term tensions do not have to leave behind the drive for decarbonization, which is so necessary to ensure not only the stability of the planet, but can help us in decisions of strategic autonomy", he pointed out.

The role that the public sector must play in decarbonisation, in the opinion of Torres Vila, is to establish the main objectives and ensure that the incentives are adequate, ensuring the formation of prices and eliminating subsidies for emission technologies that still exist. "I know that it is difficult from the political point of view for us to add a price premium to energy, but if we don't, we won't have the right investment," she assured.

The BBVA chairman recalled that, despite having closed 52% of the branches in Spain and having cut the workforce by 25% since 2015, the clientele has increased by 22%, which reflects, in his opinion, that BBVA can provide better service with fewer offices and employees.

"This efficiency is compatible with a higher quality of service. Remote customer service has also increased, we have almost 4 million customers who have remote service, more than 3,000 remote managers", he highlighted.

Last year BBVA added 9 million customers throughout the group, compared to 3 million in 2015. As Torres pointed out, all the growth in that period has occurred thanks to the digital channel. "Digitization has meant a radical change in the business model that is giving us very clear increases in market share in all markets. Digitization does not stop here, the world continues its transition at an accelerated pace and that affects all sectors", he explained.

During the opening of the meeting, the president of the CEOE, Antonio Garamendi, highlighted the response of the financial sector to the coronavirus pandemic and the support for families and businesses with financing and moratoriums. Likewise, he has highlighted that banking "is key" for the economy to work.

"It is the basis for our country to be a country that achieves the objectives that we all seek and if there is one thing we can be calm about today in Spain, it is because we have a robust financial system, which is what is going to give us the guarantee. Therefore, and it is a message for those who want to hear it, let's take care and treat the financial sector well, because we need it," Garamendi warned.