Sunday, February 18 2018 | ASIA TODAY INTERNATIONAL - Reporting the Business that Matters in Asia
Updated: 11 hours 45 min ago
Our China Vulnerability Sentiment Index resumed its upward trend in 2018, underpinned by a stronger GDP and on-going efforts to curb financial risks. Housing vulnerability index has seen significant improvement, SOE index rebounded somewhat despite deteriorating earlier. Shadow banking vulnerability index stabilized while Exchange rate index declined on RMB appreciation.
The prospects for the Portuguese economy are positive, although the country still has significant imbalances that could slow the pace of recovery if the reforming zeal shown in the past few years is not maintained.
Since the outbreak of the global financial crisis, and in response to the subsequent European debt crisis, the European Central Bank (ECB) has adopted various measures to stabilise the economy and to aim at achieving its ultimate goal: price stability.
Recently, the possibility of introducing a tax on financial transactions (FTT) as a way to cover part of the pension deficit has come up again in the Spanish public debate. These types of fees are applied to some types of monetary transactions, such as purchases of securities or stock market flotations.
Whether to share risks or reduce them. That is the leitmotiv behind the current battle over the reform of the euro, which is supposed to lead to a new initiative by June.
Weekly economic update focusing on the state of prolonged low interest rates and financial stability
The Spanish economy will grow 3.1% in 2017 and 2.5% in 2018, in line with what was expected in November. Furthermore, despite economic policy uncertainty present in the environment, we expect the recovery to continue in 2019 (2.3%) and the improvement in the economy to start to entail a growth in salaries.
Highlights: IOSCO issued a statement regarding ICOs. ESMA updated transparency calculation under MiFID II/MiFIR. The EC seeks comments on SBBs roadmap, published RTS regarding CVA, and issued draft amendments to LCR delegated regulation. EBA published stress test launch date. Finally, CNMV issued consultation on corporate governance and remuneration reports.
Latin America will grow 1.7% in 2018 and 2.5% in 2019, after growing 1.1% in 2017. The strong inflationary pressures are kept relativily bounced, except in Argentina and Mexico. The risks around the forecast of growth are biased to downside, but stabalize with respect three months ago.
Recovery toward a new normal in Latin America.
The ECB left its forward guidance communication unchanged. Renewed concerns over exchange rate volatility. “Very few chances” of a rate hike this year.
Latin America growths 1.7% in 2018 and 2.5% in 2019, after growing 1.1% in 2017. The strong inflationary pressures are still relative bounded, except in Argentina and Mexico. The risks around the forecast of growth are biased to the low, but they become stable with respect three months ago.
The policy impulse and the resilience of the economy resulted in strong growth dynamics. Inflation will remain high during most of the year on inertia, robust domestic demand and lagged effects of exchange rate depreciation. The CBRT will maintain the tight stance, while fiscal policy will likely remain accommodative in 2018.
In 4Q17, solid net inflows to Global Investment Funds (GIF) continued to decelerate, but only slightly backed by global factors: macro outlook, oil prices and subdued volatility. Inflows to GIF shall continue to cool down as the unwinding of central bank balance sheets starts draining liquidity off the markets. Our baseline scenario assumes a smooth normalization process.
Our MICA-BBVA model estimates steady growth in 4Q17 (0.6/0.7% QoQ). We revised up our growth forecast to 2.2% in 2018 given strengthened domestic factors and better global outlook. Our inflation forecast increased to 1.5% due to higher oil prices but keeping a view of gradual pick-up in core prices. We still expect a gradual normalization of monetary policy during 2018-19.