Banco Bilbao Vizcaya Argentaria (BBVA) Status update summary

Global macroeconomic environment

• Geopolitical tensions, fragmentation, and AI-driven transformation are reshaping global growth, trade, and inflation, creating both opportunities and risks.

• Oil and gas prices remain volatile but are expected to normalize or decline, supporting a relatively benign global growth outlook, though risks remain if conflicts escalate.

• US and China are forecast to maintain firm growth, with the US projected to grow over 2%, while the Eurozone faces more challenges and a downgrade due to prolonged conflict.

• AI-related investment and exports are key drivers of productivity and trade, especially in the US, while climate events and demographic shifts add uncertainty.

• Portfolio flows favor Latin America, the US, and emerging markets outside Asia, reflecting regional differences in risk, opportunity, and geopolitical distance from conflicts.

Regional growth and inflation trends

• Global GDP is projected to grow by 3.1% in 2026 and 3.3% in 2027, with inflation easing in 2027 if second-round effects are contained.

• Eurozone fiscal policy, especially defense spending, is offsetting negative shocks from conflicts and tariffs, but inflation forecasts have been revised up due to oil price shocks.

• Central banks remain cautious; the Fed is expected to hold rates until mid-2027, while the ECB has brought forward a rate hike.

• Market sentiment is supported by the AI boom and fiscal stimuli, but bond yields are high due to inflation and fiscal concerns.

• Global trade patterns are shifting due to tariffs, protectionism, and strategic rivalry, with Mexico gaining US market share, especially in AI-related sectors.

Trade, investment, and structural risks

• Geopolitical risk has a persistent negative impact on trade and FDI, with internal and external risks affecting long-term growth.

• Sovereign risk is more influenced by domestic and global financial factors than direct geopolitical shocks, though proximity to conflict matters.

• Portfolio flows favor the US and Latam over Europe and Asia, reflecting regional differences in risk and opportunity.

• Global trade continues to grow, driven by AI, but trade flows are being reconfigured amid rising protectionism.

• Structural challenges include climate events, demographic shifts, and productivity stagnation in some regions.