Group Information

Macro and industry trends

The global economy is being strongly affected by the COVID-19 pandemic. Supply, demand and financial factors caused an unprecedented fall in GDP in the first half of 2020. Underpinned by strong fiscal and monetary policy measures, as well as greater control over the spread of the virus, global growth rebounded significantly in the second half of the year. Global GDP, however, fell by around 3.3% in 2020.

Although the pandemic is likely to continue to adversely affect activity in the short term, the process of economic recovery is expected to continue. According to BBVA Research, global GDP will expand by around 5.9% in 2021 and 4.8% in 2022, in line with the expected accelerated rollout of the Coronavirus vaccine, and the gradual lifting of restrictions and economic stimulus measures. In this regard, the strong fiscal stimuli announced in the United States at the end of 2020 and the beginning of 2021, as well as the sustained accommodative stance of monetary conditions by the Federal Reserve (hereinafter the Fed) and other major central banks, have reinforced the global economy's prospects for recovery; this recovery will be led by the United States, where GDP could grow around 6.2% in 2021 and 5.1% in 2022, according to BBVA Research estimates. That being said, various epidemiological, financial, economic and geopolitical factors are contributing to the exceptionally high uncertainty.

With regard to the banking system, in an environment in which much of the economic activity has been at a standstill for several months, the services it provides have played an essential role. There are two main reasons for this: first, the banks have ensured the proper functioning of collections and payments for households and companies, thereby contributing to the maintenance of economic activity; second, the granting of new credit or the renewal of existing credit has reduced the impact of the economic slowdown on household and business incomes. The support provided by the banks over the months of lockdown and public guarantees have been essential in softening the impact of the crisis on companies' liquidity and solvency, meaning that banking has become the main source of funding for most companies.

In terms of profitability, European and Spanish banks have deteriorated from the outset of the crisis, primarily because many entities recorded high provisions for impairment on financial assets in the first two quarters of 2020 as a result of the worsening macroeconomic environment following the pandemic outbreak. Furthermore, the accumulation of capital by banks since the previous crisis and the current very low interest-rate environment in which we have been since several years, will continue to put pressure on bank profitability. Nevertheless, the banks are facing this situation from a position of strength and with solvency that has been constantly increasing since the 2008 crisis, with reinforced capital and liquidity buffers and, therefore, with a greater capacity to lend.


In the Eurozone, activity remains weak so far this year, limited by restrictions on activity adopted to curb new outbreaks of the virus and still-slow vaccine rollout. The lifting of some restrictions, along with recovery in global demand, should continue to support both the manufacturing and exports sectors, which could partially offset the fall in activity in the consumer and service sectors during the first half of 2021.

In terms of GDP growth, following a fall of 6.8% in 2020, BBVA Research still expects recovery to gain substantial momentum throughout this year, underpinned by the vaccine rollout, the European recovery fund (NGEU) and, more recently, by stronger global recovery, which will benefit from the United States' aforementioned fiscal stimulus. As a result, GDP could grow around 4.5% in 2021 and 4.9% in 2022 in the Eurozone as a whole. Furthermore, national expansionary fiscal policies, the extension of support measures to the most affected sectors and support from the European Central Bank (ECB) should avoid more-persistent negative effects.

With regard to the banking system, the ECB's immediate objective is to maintain favorable financial conditions. At its March meeting, the ECB kept principal financial operations interest rates, credit easing interest rates and deposit facility interest rates unchanged at 0.00%, 0.25% and -0.50% respectively and announced a significant increase in asset purchases under the Pandemic Emergency Purchase Program (PEPP) for the second quarter of 2021. However, BBVA Research considers that the PEPP provision (€1.85 trillion) is large enough to comfortably increase purchases over the coming months without the ECB having to increase its provision.


In terms of GDP growth, the Spanish economy contracted by 10.8% in 2020. This year, despite the uncertainty in early 2021, BBVA Research predicts that the economy will gain traction in the coming months, recording higher growth rates from the second quarter onward and, thereafter, traction will be favored by an international environment of ambitious fiscal policies (especially in the United States), by the arrival of European recovery funds and by progress in the vaccine rollout in Spain and the rest of the EU. Growth is therefore expected to stand at 5.5% at year-end. BBVA Research predicts that accelerated economic activity from the second half of this year onward will lead to GDP growth of 7% in 2022. The main risks surrounding this scenario are linked to the pace of vaccine rollout and the pandemic, the impact of the crisis on employment and production capacity, and slow implementation projects relating to the NGEU program.

Regarding the banking system, according to the latest Bank of Spain data available, the total volume of lending to the private sector recovered by 2.6% in 2020 as a result of growth in new business lending transactions since April, within the framework of the public guarantee programs launched by the government to combat COVID-19. This trend was sustained in January 2021, recording year-on-year growth of 2.1% compared to January 2020. Asset quality indicators continued to improve (the NPL ratio stood at 4.51% at year-end, and 4.54% in January 2021). Profitability entered negative ground throughout 2020 as a whole (ROE -1.4%) due to the increase in provisions as a result of the COVID-19 crisis and, more importantly, due to the extraordinary negative results recorded in the first half of the year associated with the deterioration of goodwill in some entities. Spanish entities maintained comfortable levels of capital adequacy and liquidity, allowing them to weather the low-interest-rate environment, which has kept profitability under pressure from a more robust position than in the previous crisis.


GDP growth contracted 8.5% in 2020, slightly better than expected, due to better-than-projected economic activity in the second half of 2020 and, in particular, due to higher growth in the United States driven by the aforementioned fiscal package; this will help the economy to grow higher than was initially expected throughout 2021, but will not yet reach pre-pandemic activity levels. By 2021, BBVA Research predicts that the Mexican economy will grow by 4.7%. This growth will be driven by foreign demand, while consumption and investment components will recover more slowly. By 2022, the economy will moderate to 2.8%, influenced by slow recovery in investment and uncertainties surrounding domestic policies. In terms of inflation, upward surprises in the first months of 2020 led Banxico to stop the cycle of benchmark rate reductions, and BBVA Research now predicts that the central bank will keep the interest rate unchanged at 4% for the rest of this year. The next change in benchmark interest rates will depend on the Fed's next move.

With regard to the banking system, based on data from the National Banking and Securities Commission (CNBV, by its acronym in Spanish) as of February 2021, loans decreased by 2.0% and an increase was observed only in the mortgage portfolio, while total deposits increased 10.0% year-on-year. The NPL ratio increased year-on-year (20.5% in February 2021, reaching a ratio of 2.44%) and capital indicators remain comfortable.


In Turkey, GDP growth reached 1.8% in 2020. Leading indicators for the first quarter of 2021 indicate robust economic activity. Despite the upward revision in global GDP growth forecasts and sound current momentum, BBVA Research is maintaining the previous GDP growth forecasts (5% for 2021 and 4.5% for 2022), based mainly on improvements in the most recent data, which will be offset by uncertainties surrounding domestic economic policies, the tightening of financial conditions and restrictive measures persisting in order to curb the pandemic.

With regard to the banking system, the central bank (CBRT) raised the base rate by 200 percentage points in March to 19%. BBVA Research predicts that CBRT will start cutting rates gradually toward the end of 3Q21, and that it will close the year at around 16%. Inflation estimates have been adjusted to 15% by the end of 2021.

Based on data as of February 2021, the total volume of credit in the banking system increased 28.4% year-on-year (up 36.5% in Turkish lira and up 18.5% in foreign exchange), while deposits increased 27.3% year-on-year. These growth rates include the effect of inflation. The NPL ratio stood at 4.02% at the close of February 2021.


With regard to growth, following a contraction of 9.9% in 2020, BBVA Research predicts that the economy will recover to 7% in 2021 and 3% in 2022. Indicators available for the first quarter of 2021 suggest that consumption and investment are recovering, but employment will recover very slowly, which will impact private consumption. Growth is not free from risks such as a new wave of COVID-19 infections or slow vaccine rollout, although factors such as improved soy prices and increased allocations for Special Drawing Rights (SDRs) by the International Monetary Fund (hereinafter IMF) increase the government's room for maneuver. Argentina is likely to reach an agreement with the IMF to refinance its external debt from October. Inflation closed the year at 36% and BBVA Research still predicts that it will stand at around 50% by the end of 2021.

In the banking system, the positive trend for both lending and deposit growth continued in January 2021, with growth of 34.0% and 57.8% respectively. Both were influenced by high inflation. The NPL ratio, however, fell slightly to 3.8% in January 2021.


Growth data indicate that Colombia's contraction in activity reached 6.8% in 2020 and, for the next two years, BBVA Research predicts a partial recovery of 5.5% in 2021 and 4.8% in 2022. This improvement could be limited by the effect of new outbreaks of COVID-19, by new restrictions on movement and by the effect of the announced fiscal reform, which could affect consumption and investment. Furthermore, consumption will continue to be hindered by the negative effect on employment, particularly in the formal sector of the economy, which will not recover to pre-pandemic levels until 2023. Inflation remained low in the first few months of the year and BBVA Research predicts that it will converge to 2.9% by year-end. The Central Bank kept the benchmark interest rate unchanged at 1.75%, and BBVA Research believes it will remain unchanged for the rest of the year, with a new cycle of gradual increases next year.

Total lending in the banking system grew 3.4% year-on-year at the end of January 2021, due to growth in the commercial portfolio driven by government-approved letters of credit and guarantee programs during the pandemic. The system's NPL ratio as of January 2021 was 5.18%. Total deposits increased by 12.6% year-on-year in the same period.


With regard to growth, the Peruvian economy contracted 11.1% in 2020, as it was hit hard by the pandemic, particularly in the first half of the year. In the first months of 2021, the effects of the new wave of COVID-19 infections have resulted in new restrictions that could impact activity, albeit to a lesser extent. BBVA Research predicts activity will expand to 10% in 2021 followed by growth of 4.8% in 2022. Public and private consumer spending will be key to recovery this year, as will be recovery in the mining industry influenced by the rise in copper prices. Activity dynamics this year, however, will be subject to uncertainty relating to the electoral process, which could also impact infrastructure plans scheduled for 2022. With regard to inflation, BBVA Research predicts that this will stand at 2.3% at the end of the year, within the target set by the central bank, which lowered the monetary policy rate to an all-time low of 0.25%. BBVA Research estimates that this interest rate level will remain throughout the year and predicts that the first increase to the benchmark rate will not occur until the first half of 2022.

The banking system showed high year-on-year growth rates for lending and deposits (up +14.0% and +25.4% respectively, at the end of December 2020), due to the strong momentum of the Plan Reactiva Perú; the system showed lower profitability levels due to the current crisis (ROE: 2.25% as of February 2021) but with contained NPLs (NPL ratio: 3.42% as of February 2021) due to the payment deferrals applied.


30-06-21 30-03-21 31-12-20 30-09-20 30-06-20
Official ECB rate 0.00 0.00 0.00 0.00 0.00
Euribor 3 months (1) (0.54) (0.54) (0.54) (0.49) (0.38)
Euribor 1 year (1) (0.48) (0.49) (0.50) (0.41) (0.15)
USA Federal rates 0.25 0.25 0.25 0.25 0.25
TIIE (Mexico) 4.25 4.00 4.25 4.25 5.00
CBRT (Turkey) 19.00 19.00 17.00 10.25 8.25
  • (1) Calculated as the month average.

Foreign exchange continued showing volatility during the first quarter of 2021. The macroeconomic expectations improvement in the United States caused by new fiscal stimuli and a good rate of vaccination has contrasted with the evolution in other geographical areas. The aforementioned has favored the U.S. dollar, which has appreciated 4.7% against the euro. The Mexican peso, after a good behaviour in the last part of the quarter, registered an appreciation of 1.5% against the euro. Besides, the Turkish lira closes the quarter with a 6.3% depreciation against the euro, having been harmed in March by instability caused by the shifts in the central bank. As to other foreign exchanges, Chilean peso and Peruvian sol have appreciated against the euro 1.6% and 0.8% respectively, while the Argentine peso and Colombian peso depreciated by 4.2% and 3.9% respectively.

For information on the BBVA Group's exchange rate risk management policies, see the "Risk Management" chapter of this report.


Year-end exchange rates Average exchange rates

∆% on
∆% on

∆% on
U.S. dollar 1.1884 (5.8) 3,3 1.2051 (8.6)
Mexican peso 23.5784 10.0 3.6 24.3235 (1.8)
Turkish lira 10.3210 (25.6) (11.7) 9.5232 (24.9)
Peruvian sol 4.6146 (14.5) 3.6 4.4918 (16.2)
Argentine peso (1) 113.74 (30.7) (9.2) - -
Chilean peso 873.81 4.6 (0.2) 867.87 3.2
Colombian peso 4,464.43 (5.7) (5.7) 4,368.23 (6.9)
  • (1) According to IAS 29 "Financial information in hyperinflationary economies", the year-end exchange rate is used for the conversion of the Argentina income statement.