BBVA improves its GDP forecasts but warns of risks if the Government does not undertake reforms


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Improvement in short-term economic forecasts, but accompanied by a warning message to the Executive so that it does not miss the opportunity to undertake structural reforms to transform the economy. BBVA Research today revised upwards the forecast for Spanish GDP growth in 2021 from 5.5% to 6.5% and kept the advance for 2020 at 7%. This improvement is partly based on the fact that the Spanish economy fell less than expected in the second quarter and recorded a contraction in activity of -0.4% compared to the -0.9% forecast. From the new edition of the report “Spain Situation” presented this Wednesday, it can be seen that the improvement was due to the pull in exports and the boost in household consumption. In contrast, investment contracted due to the unfavorable evolution of construction, public consumption stagnated and foreign tourism fell more than expected.

Despite the improvement in these forecasts, the entity’s research service warned of medium and long-term risks if the necessary measures to correct vulnerabilities and transform the economy are not addressed. The entity’s experts indicated that the Government must present in the coming months “A reform agenda to which the European Commission will have to give its approval”. “An opportunity presents itself but not taking advantage of it is also a downside risk”, pointed out the chief economist of the BBVA Group and director of BBVA Research, Jorge Sicilia, in relation to the arrival of European funds. Thus, medium-term growth will depend “on the reforms implemented in the coming months and on the speed and efficiency in the execution of European funds.” In addition, growth must be compatible with environmental sustainability goals.

Likewise, the experts from BBVA Research remarked in the “Spain Situation” report that GDP growth in the second quarter of 2021 will be higher than expected with an advance that could be between 2.3 and 3.3% quarterly, that is, above the previous forecast of 1.3%. The recovery will continue in the third quarter due to the vaccination campaign and the easing of restrictions, among other factors, which have allowed an acceleration in the growth of private consumption, mainly in services.

On the other hand, BBVA maintains its forecast for 2022, when growth could reach 7% thanks to the control of the disease, the use of savings impounded by families, the approval of the Recovery Plan, the arrival of European funds and the ECB impulse measures, among other variables. Despite the improvement in growth, the experts at BBVA Research also give a slap on the wrist due to the high deficit, which will remain at 7.7% in 2021 and 5.5% in 2022, and the significant level of indebtedness since both indicators “suppose a situation of fragility”.

Likewise, BBVA warns of high inflation, which will remain above expectations in Spain and in other developed countries. Globally, BBVA Research estimates that global GDP will grow 6.3% in 2021 in 2020 and around 4.7% in 2022.

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