Banco Bilbao Vizcaya Argentaria (BBVA) Status update summary

Global macroeconomic environment and outlook

• Geopolitical tensions, fragmentation, and AI-driven transformation are reshaping global growth, trade, and inflation, with demographic shifts and climate events adding uncertainty.

• Oil and gas prices remain volatile but are expected to normalize or decline by 2H26, supporting a benign global growth outlook, though risks remain if conflicts escalate.

• The US and China are projected to maintain firm growth, with the US expected to grow over 2% in the next two years, while the Eurozone faces downgrades due to geopolitical shocks and sector volatility.

• AI-driven investment is boosting productivity and trade, especially in the US, and is a key driver of global economic activity.

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

Regional growth and inflation trends

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

• Eurozone fiscal policy, especially defense spending, is offsetting negative shocks from conflicts and tariffs, with inflation forecasts adjusted upward due to oil price shocks but core inflation expected to stay between 2%-3%.

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

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

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

Spain: Economic outlook and challenges

• GDP growth is forecast at 2.4% in 2026 and 2.1% in 2027, with recent data suggesting possible acceleration in 2Q26, supported by strong domestic demand, resilient job creation, and robust service exports.

• Exports of goods are expected to decline in 2024 but recover by 2027; non-tourism service exports, immigration, and higher labor force participation support employment growth.

• Household income and wealth improvements are boosting consumption, while favorable conditions support residential investment.

• Fiscal policy remains expansionary but is expected to tighten by 2027, contributing to a slowdown; defense spending and renewable energy investments are notable growth drivers.

• Structural challenges include a persistent housing deficit, inflation above the Eurozone average, and stagnant productivity despite strong employment gains.