Publications

This article assesses the immediate impact the first wave of the pandemic had on euro area household income, consumption and saving, both at the aggregate level and for the main economies in the area. Drawing on the institutional sector accounts, with information to Q2, there was a contained decline in household income, despite the worsening labour market, thanks to the speed and extensive scope of the economic policy measures approved. However, the collapse in consumption during the lockdown meant that saving rebounded in an extraordinary fashion. The outbreak of the second wave and uncertainty over the scale of the economic impact will contribute, for some time longer, to saving remaining relatively high and to the accumulated reservoir of private saving not fully materialising in the form of greater expenditure.

The European Central Bank’s and the Federal Reserve’s announcements of unconventional monetary policies have contributed to significantly reducing market perceptions of the probability of extreme macro-financial events. This phenomenon has arisen in periods of intense market strain, such as the global financial crisis and the current COVID-19 crisis. These measures have served to mitigate the materialisation of extremely unfavourable events through the feedback loop between the financial sector and the real economy and to ensure adequate monetary policy transmission.

Labour markets in the euro area in 2020 Q2 were severely affected by the COVID 19 lockdown measures. In this context, the conventional concepts of employment and unemployment are insufficient to describe labour market developments. Job retention schemes averted potential redundancies and replaced them with temporary lay-offs and reductions in working hours. Further, many workers who lost their jobs were unable to seek work owing to mobility restrictions. Accordingly, under the conventional measure of unemployment, they were not considered unemployed. A broader measure of the unemployment rate, taking into account this type of inactivity and temporary lay-offs, lifts the share of the euro area population available for work who were totally or partially unemployed in 2020 Q2 to 27%. The sharp increase in unemployment, understood in this broader sense, and the short-time work schemes prompted an unprecedented fall-off in employment in terms of hours worked. This decline was highly uneven, with Spain being the hardest-hit country. In principle, temporary lay-offs should help curb the potential hysteresis effects on the euro area’s labour markets. However, the more protracted the health crisis, the more severe these effects will tend to be.

The effective departure of the United Kingdom (UK) from the European Union (EU) opens up a new period of relations between the two areas. The current health crisis limits economic policies’ room for manoeuvre to accommodate the costs of transitioning to a new economic relationship, whatever final form it may take. This article describes the most recent developments in the negotiation process and outlines three possible scenarios for the future EU-UK trading relationship, providing simulations of the potential macroeconomic impact in each case. Moreover, the recent trend in trading and financial relations between the United Kingdom and Spain is set out in a box.

The first part of this article describes developments in the profitability, solvency and liquidity of Spanish non-financial corporations, drawing on the integrated CBSO database, which contains annual information up to 2019. This analysis evidences that, at end-2019, the corporate sector was in a relatively strong position to withstand an adverse shock. This was, however, compatible with the existence of segments that were in a more vulnerable position. It then analyses the impact of the COVID-19 crisis on the firms’ financial position, on the basis of Central Balance Sheet Data Office Quarterly Survey data for the first three quarters of 2020, which include a relatively small number of generally large firms. The COVID-19 crisis has triggered steep drops in ordinary earnings, employment and profitability levels in this sample of firms. In addition, extraordinary gains and losses have performed very negatively. This has led this group of firms to record a net loss in the Central Balance Sheet Data Office Quarterly Survey for the first time since 2002. The financial position of these firms has also deteriorated in 2020. The average debt ratios and the average debt burden ratio have risen, caused by both higher corporate debt and, to a greater degree, lower ordinary earnings. However, the firms have increased their liquidity buffers as a precautionary measure. The article also includes two boxes. Respectively, these analyse the impact of the COVID-19 crisis on the profitability and the solvency of the corporate sector in 2020, on the basis of various microsimulations. The findings of Box 1 show that the decline in profitability appears to have been particularly steep in the SME segment and, especially, in the sectors hardest hit by the crisis. Box 2 evidences that the crisis seems to have prompted a sharp rise in the financial pressure borne by the firms, in addition to undermining, albeit more moderately, their solvency.

This article describes the boom of recent years in e-commerce in Spain, which reached a 14% share of sales in 2016, similar to the euro area average. The COVID-19 pandemic may have accelerated this trend, with some authors indicating a 6 pp increase in the share of sales during March of this year to over 20%. This article reviews the academic literature analysing potential price differences for the same product depending on whether it is sold in a traditional establishment or through a digital platform. The papers assessed do not observe significant price differences between the two markets. They also show that online markets display some of the same characteristics that are observed in traditional markets, such as a low frequency of price changes and high price dispersion for the same product sold in different online points of sale. Lastly, it is estimated that the development of e-commerce has nurtured business competition in Spain, reducing mark-ups. However, there is no evidence that corporate profits have been affected, which may reflect lower fixed costs associated with the sourcing of certain inputs for digital channels.

This article assesses the cost of bank equity in Spain and the euro area since 2007, focusing particularly on the period of the COVID-19 pandemic. There was a marked rise in the cost of equity in March 2020, followed by a decline in the subsequent months. The article assesses the factors responsible for this movement, and compares it against the change in interest rates on alternative bank funding instruments.

This article analyses agents’ perception of the period of low inflation in recent years, in the context of a model in which these agents form their expectations on the basis of simple forecasting rules. The approach used allows a distinction to be drawn between which portion of the low inflation phenomenon might be due to temporary factors and which might be considered permanent. The results of the analysis for the euro area suggest that agents perceive the inflation rate’s recent departure from the monetary policy objective to be predominantly temporary, although these deviations are marked by a considerable degree of persistence. In comparative terms, the estimated persistence in the case of the euro area of the deviations observed from the inflation target approximately double those in the United States over the 1-and 5-year horizons.

The favourable course of the pandemic from early March onwards prompted the Chinese government to gradually ease the most stringent measures taken to fight COVID-19 that had been in force since January, relaxing confinements at home and the restrictions on both mobility and the pursuit of economic and business activity. This article describes the main features of the phase of economic recovery in China so far in 2020. These notably include, in first place, the considerable progress already made in the economic recovery in the country as a whole, although it was initially more lagged in Hubei province, where the pandemic originated. Second, people’s movements have gradually returned to normal, reaching pre-crisis levels in early October. Third, industrial activity has seen a swift recovery, albeit one partially underpinned by temporary factors, such as supplying the demand of other economies with lockdown measures in force. Moreover, services activity, which requires a high degree of social interaction, still lags. Fourth, as regards spending, the consumption of durable goods has recovered more slowly, while the saving rate has increased, which could be attributable to precautionary motives. Lastly, the pandemic appears to have exerted overall downward pressure on inflation in the country as a whole. Nevertheless, it may not be possible to fully extrapolate the experience of China to other economies, owing to the combination of some specific factors, such as the health strategy pursued and, in the economic sphere, the temporary but notable support of the external sector through manufacturing exports.

The latest Bank Lending Survey results show a widespread contraction of credit supply both in Spain and in the euro area in 2020 Q3, which would be linked to increased risk perception. On the demand side, demand from firms fell in both Spain and the euro area following the marked increase recorded between April and June. Conversely, applications for loans to households for house purchase rose both in Spain and in the euro area, while applications for consumer credit and other lending continued to decline in Spain, albeit at a considerably slower pace than in the previous quarter, and increased in the euro area as a whole. Banks consider that monetary policy measures continued to contribute overall to an expansion of credit supply.

As has happened with other industries, large technology companies are increasingly present in the financial services sector. In addition to being providers of digital tools and solutions, these firms can also act as a distribution channel for goods and services that are traditionally produced by financial institutions. Further, in certain business niches, BigTech firms are also emerging as new, direct competitors to banks. Without prejudice to the potential benefits that this new situation could present, the significant disruptions caused to industries by the increasing consolidation of digital platforms’ activity have prompted European institutions to instigate various actions aimed at nurturing the fairest functioning of the markets in which they act. One of the most recent examples is the Regulation on promoting fairness and transparency for business users of online intermediation services, in addition to other competition and general regulatory initiatives for European digital services markets. Despite their broad scope, these measures enable some of the challenges that major digital actors pose to the financial sector to be addressed. However, they do not give a satisfactory response to another series of more specific and equally relevant matters, such as credit procyclicality, adverse selection and interdependencies. For these matters, more specific approaches are needed that help trace parallels between the activity of these platforms and of those that are already regulated, as a first step in the process to adapt the current regulatory and supervisory framework.

This article shows that collective investment undertakings (CIUs) have grown notably in recent years, both in Spain and other European countries. These developments have come in step with greater sector concentration and a rising percentage of assets managed by entities registered abroad. In line with the evidence documented internationally, the investment portfolios of CIUs domiciled in Spain reflect an increase in risk-taking over the last few years, although the weight of lower credit quality fixed-income instruments is very low. There are very close links between the Spanish banking sector and CIUs. First, a very sizeable share of the assets of Spanish CIUs is managed by subsidiaries of Spanish deposit-taking institutions. Second, a very significant proportion of CIUs’ investment portfolios comprises financial assets issued by the banks themselves. Therefore, in-depth analysis of these interconnections is essential to assess the resilience of CIUs and that of the financial sector as a whole.

Economic activity in Latin America has been drastically affected by the COVID-19 global health crisis, although this has been partly mitigated by economic policy actions taken by national authorities and multilateral institutions. As in other parts of the world, these actions have, in many cases, included new measures, with respect to previous crises, such as, for the first time in the region, the widespread use of unconventional monetary policy instruments. Despite these actions, Latin America may record a drop in GDP of close to 8% in 2020, the largest in recent decades and notably larger than those in other emerging regions. In recent months, despite less support from international capital flows than in previous recoveries, activity has started to recover. This is expected to continue in the short term, although the recovery will be uneven across economies, gradual and subject to a high degree of uncertainty. In the medium term, the region’s growth outlook is also subject to considerable uncertainty, mainly linked to the doubts regarding the future course of the pandemic. Generally, downside risks predominate, given that the region’s pre-existing vulnerabilities may be amplified by the persistence of the crisis. The area’s banking systems have also been hit by the economic deterioration, but have displayed notable resilience in this first phase of the crisis. From the economic policy viewpoint, this scenario should lead to the design and implementation of a broad medium-term reform agenda, to increase the region’s resilience and raise its potential growth capacity, while being conducive to the correction of the main macroeconomic and social imbalances.

This article analyses recent developments in the average effective retirement age in light of the 2011 reform and the different forms of retirement. The analysis shows, first, that the effective retirement age has tended to increase in recent years as a result of the net increase in the retirement age within all forms of retirement, which has more than offset the opposite effect prompted by the growing share of the various forms of early retirement. Second, the impact of the 2011 reform, from the standpoint of retirement age, seemingly remains limited, as the percentage of new retirees who take retirement on the basis of legislation prior to the reform is still significant, and the statutory retirement age for workers with sufficiently lengthy contribution histories is still 65. Third, on average, workers who take some form of early or partial retirement have the lowest retirement age, although they generally have longer contribution periods and higher regulatory bases.

This article analyses recent developments in the average effective retirement age in light of the 2011 reform and the different forms of retirement. The analysis shows, first, that the effective retirement age has tended to increase in recent years as a result of the net increase in the retirement age within all forms of retirement, which has more than offset the opposite effect prompted by the growing share of the various forms of early retirement. Second, the impact of the 2011 reform, from the standpoint of retirement age, seemingly remains limited, as the percentage of new retirees who take retirement on the basis of legislation prior to the reform is still significant, and the statutory retirement age for workers with sufficiently lengthy contribution histories is still 65. Third, on average, workers who take some form of early or partial retirement have the lowest retirement age, although they generally have longer contribution periods and higher regulatory bases.

The Central Balance Sheet Data Office Quarterly Survey (CBQ) data for 2020 H1 show that the lockdown measures introduced in the context of the COVID-19 health crisis had a sharp adverse impact on activity, albeit with notable differences across the sample firms. This led to a sharp contraction in ordinary profit and profitability levels, resulting in a net loss in aggregate terms, something not seen in the CBQ since 2002. In addition, firms increased their indebtedness to fund larger operating deficits. The share of ordinary profit (Gross Operating Profit plus financial revenue) used for interest payments also rose slightly, reversing the downward trend of this ratio in recent years. The article includes a box that analyses firms’ liquidity needs in 2020 H1 as a result of the fall in activity, investment in real assets and debt repayments, and the financial deterioration recorded by these firms.

The COVID-19 pandemic has significantly altered the financing of the non-financial private sector. Financing of the self-employed and businesses has risen as a consequence of both the increase in demand, stemming from greater liquidity needs and from the perceived increase in refinancing risks, and the expansion of supply, stimulated by the introduction of public guarantee programmes and by the European Central Bank’s policies on the provision of liquidity to credit institutions. In contrast, new lending to individuals has fallen, largely as a consequence of the deterioration in the macroeconomic outlook, which has reduced the supply and demand for credit in this segment. The adverse impact of the COVID-19 crisis on the credit quality of deposit institutions’ portfolios is currently being mitigated by the measures taken by the economic authorities and the institutions themselves (in particular, the public guarantee programme and legislative and banking sector moratoria). However, non-performing loans have increased since the start of the pandemic, both in the case of lending to non-financial corporations and to households. The non-performing loans ratio of deposit institutions has, however, held steady since March, as the expansion in lending (the denominator of the ratio) has offset the increase in the volume of non-performing loans (the numerator).

This article analyses, by region, the trade exposure of Spanish firms to the United Kingdom, based on individual information from the Balance of Payments and the Central Balance Sheet Data Office. Exposure to the UK economy shows some regional variability. Since 2016 there has been a fairly widespread downward trend of this exposure in terms both of nominal exports of goods to the United Kingdom and of the number of companies engaging in this activity. The vulnerability of Spanish export companies to Brexit is, in part, moderated in broad terms by their productivity levels and by the degree of geographical diversification of their exports, which are higher than at firms which trade with the main euro area partners.

Real estate investment trusts in Spain (SOCIMIs by their Spanish abbreviation) are instruments for investing in real estate assets which were regulated for the first time in Spain in 2009. They have grown rapidly in recent years to reach a relative size, approximated by their stock market capitalisation in terms of GDP, which is above the average for this type of companies in the euro area as a whole. In Spain this sector is highly concentrated, since a few, large vehicles exist alongside a sizeable group of small companies. SOCIMIs listed in regulated markets and those listed in alternative markets are notably different in terms of their size, balance sheet composition and ownership structure. The low exposure of Spanish SOCIMIs to the residential real estate segment, although it has risen in recent years, is worth noting, as is the high proportion of their capital owned by non-resident investors.

The Financial Accounts of the Spanish Economy show that in 2019 households received, for the second consecutive year, positive net bank financing in a moderate amount, similar to that received in 2018, mainly owing to the increase in consumer and other lending. These developments were compatible with a further reduction in household bank debt (to 57% of GDP at year-end, down 2 percentage points (pp) from the level in 2018 and 29 pp from its peak in 2010). At the same time, the gross financial wealth of households increased – unlike in 2018 – mainly as a result of the rise in value of their financial portfolio, in line with the appreciation of stock market indices and fixed-income securities. As regards firms, the net flow of bank lending received from resident financial institutions was once again negative, in an amount slightly lower than that of the previous year, contributing to a drop in their debt ratio to 73% of GDP, down 2 pp from 2018 and 47 pp from the maximum levels recorded in mid-2010. Finally, in contrast to the previous year, non-financial corporations’ own funds increased, owing to both fund raising via this channel and, to a greater extent, the increase in the value of these instruments.

This article estimates the financial return provided by the Spanish pension system for a sample of new retirees in 2017, calculated on the basis of the Muestra Continua de Vidas Laborales. The findings show an average real annual return (understood as the discount factor that equates the present value of the contributions paid over a working life with the value of the expected pension) of 3.5%, the 25th and 75th percentiles of the distribution of the estimated returns being 2.5% and 4.2%, respectively. By type of pension, the lowest returns are associated with early retirement, while late retirement produces higher returns, although these are still lower than for ordinary retirement. In terms of pension unit cost, the system would provide more than €1 of benefit for each euro of contribution for most of the individuals in the sample. The findings show that, on average, 2017 retirees receive €1.74 of pension for each euro of contribution; the 25th and 75th percentiles of the distribution are €1.25 and €2.03, respectively.

In the European economies, employment in the retail sector, in accommodation and food services and in the arts and recreation activities has been hit especially hard by the pandemic, so it is important to ascertain the financial resources that the individuals working in these sectors have available to withstand a possible fall in their income. This article draws on the Banco de España’s Survey of Household Finances (EFF, by its Spanish abbreviation) to characterise the financial position of the workers most affected by the present crisis. In 2017, these sectors employed approximately half of all women and the under-35s, two population groups with relatively lower labour income levels. In many cases, these workers lived in households that included higher income earners, which may partially mitigate the incidence of possible job losses. Even so, in 2017, 28% of those employed in the sectors affected lived in households whose financial assets amounted to less than one month’s income, and one in 12 lived in households for which debt repayments amounted to more than 40% of their pre-tax income. Among the workers in the sectors most affected by the pandemic, the financial position of those who were less able to work from home and those employed in the accommodation and food services and arts and recreation sectors was relatively more vulnerable.

In recent years, information on the usage of cards as a means of payment has been increasingly used as an indicator of private consumption. The advantages of such information include its daily frequency and the short time lag from the moment of spending until it becomes available. This article uses this indicator to analyse Spanish household consumption since the state of alert was declared in mid-March and to explore the corresponding determinants. Indeed, the drop in consumption during the COVID-19 health crisis has been far greater than that suggested by the usual determinants, indicating that other factors could largely explain the developments observed. Included here are the greater uncertainty as to the course of the disease and its economic repercussions, and the restrictions on people’s movement and on various economic activities during the state of alert. Card payment data can be used to investigate the importance of social distancing measures when explaining the developments observed in consumption since mid-March. The article identifies that the indicators of payment card usage show a high correlation with the course of the restrictions on movement and activity. The information available also shows how in-person purchases were replaced by online shopping during lockdown.

On 20 April 2020 the West Texas Intermediate (WTI) oil futures price for May delivery turned negative for the first time in history. Other crude prices also posted very low values and their volatility soared, far more than that on stock markets. This article analyses the differences between the spot and futures markets for crude, demonstrating the key role they played in the source and subsequent correction of this event, which affected above all WTI contracts more than Brent. The article also highlights the increasingly significant presence of oil exchange-traded funds (ETFs) and their growing use as a retail investment instrument.

The latest results of the Bank Lending Survey are very much marked by the impact that the COVID 19 pandemic has had on economic activity and, in consequence, on the credit market. Thus, during 2020 Q2, the credit supply to enterprises eased in Spain, highly influenced by the establishment of the government-backed ICO COVID 19 credit line. In the euro area, the credit supply to enterprises presented little change, in contrast to the significant tightening recorded during the previous financial crisis, owing both to the impact of the tax and economic policy measures adopted and to banks’ stronger capital positions. Both in Spain and the euro area, credit standards and terms and conditions for lending to households tightened, largely as a result of the increase in perceived risk and the deterioration of the economic outlook overall. As regards credit demand, loan applications by enterprises rose sharply both in Spain and the euro area, on account of the increase in their liquidity needs primarily to fund working capital. By contrast, households’ demand fell markedly, against a backdrop of growing economic uncertainty.

The data from the Central Balance Sheet Data Office Quarterly Survey (CBQ) for 2020 Q1 show that the lockdown measures introduced in the context of the COVID-19 health crisis had a sharp adverse impact on the activity of the sample firms in the first quarter of the year. This led to a sharp contraction in ordinary profit and profitability levels, even reducing final net profit to a negative aggregate value, something that had not happened in the CBQ since 2002. In addition, the need to cover operating deficits contributed to a rise in these firms’ debt, and the share of ordinary profit (gross operating profit plus financial revenue) used for interest payments also rose slightly, reversing the downward trend of this ratio in recent years. The article includes a box that analyses firms’ liquidity needs in 2020 Q1 (as a result of the fall in activity, investment in real assets and debt repayments) and the financial deterioration recorded by these firms.

According to the balance of payments statistics, Spain’s net lending stood at 2.3% as a percentage of GDP in 2019, slightly down on the prior year, against a backdrop of continued, albeit slowing, economic growth. Developments in net lending are explained by the reduction in the capital account surplus, resulting from the decrease in funds from the EU, stagnation in tourism receipts as a percentage of GDP and the widening of the deficit on non-energy goods, which offset the improvement in the energy balance prompted by the decline in oil prices. There has been an abrupt change in the outlook for the economy’s external balance as a result of the COVID-19 health crisis, with major uncertainty in the near future about the scale (and even sign) of its effects on this balance, against a backdrop of a drastic reduction in the foreign goods and services trade. For the time being, the information on the balance of payments relating to March shows a net borrowing position, for the first time in that month since 2012, associated with the sharp fall in tourism receipts caused by the measures to restrict movement adopted in Spain and in source countries. Future developments in inbound tourism, in particular, will depend greatly on how quickly restrictions on movement are lifted. This, in turn, hinges both on how the pandemic continues to unfold and on risk perception, which could lead potential tourists to voluntarily adopt social distancing measures. In 2019, the negative net international investment position of the Spanish economy decreased for the fifth year running, to stand at 74% of GDP, its lowest level since 2006. These developments, which represented the biggest fall in the last seven years, were underpinned by the nation’s net lending position, the positive amount of valuation effects and GDP growth. In terms of financial flows, excluding the Banco de España, the surplus balance of financial transactions of the Spanish economy was lower than in 2018, influenced by the rise in purchases of general government debt by international investors, which was only partially offset by the fall in foreign direct investment inflows. For the first time since 2014, the financial account of the Banco de España showed a surplus, affected by certain changes in the implementation of the ECB’s monetary policy.

The global spread of COVID-19 and, above all, the social distancing measures adopted to contain the health crisis have resulted in a significant standstill in economic activity in most economies. The economic impact on different countries’ or regions’ economies may vary significantly depending on their respective productive structures and will also be influenced by the cross-sectoral customer-supplier relationships in the domestic and international supply chains. This article investigates how the impact of the shock triggered by COVID-19 may vary depending on these two characteristics: differences in the productive structure and cross-sectoral connections. First, the impact of two different scenarios envisaged for Spain on the value added of its different regions (Comunidades Autónomas) is quantified. Then, those same scenarios are used to estimate the impact of an identical shock on the largest euro area countries (Germany, France, Italy and Spain). The findings confirm that the effects of the restrictions imposed on economic activity in Spain to contain the pandemic vary according to the region on account of the different productive structures and cross-sectoral relationships. Broadly speaking, it appears that the estimated impact is significantly higher in the regions most exposed to the sectors related to accommodation and food service activities, such as the island regions. The impact would also be high in other regions, which tend to be those where the manufacturing of vehicles is of particular importance, due not only to the closure of production plants, but also to the spillover effect on other sectors. By applying to the main euro area economies the same degree of sectoral shutdowns as that observed in the Spanish economy, the impact on Germany, France and, to a lesser extent, Italy is comparatively smaller than in Spain. The differences in productive structure and cross-sectoral connections render the Spanish economy relatively more vulnerable to a common shock such as the current pandemic due to its greater reliance on those sectors particularly stricken by the social distancing measures.

This article analyses the employment possibilities of the new generations, in comparison with those of previous generations at a similar age. The generational standpoint offers several interesting findings. First, in each age bracket, average real wages received by skilled workers have declined over the generations, while those received by less skilled workers have scarcely changed. Second, when these wage data are combined with the amount of time worked, it is found that in recent times there has been a widespread drop in average annual wages. This decline in annual employment income experienced by the younger generations appears to have a certain cyclical component. Lastly, in terms of job insecurity, the younger generations face a slightly lower temporary employment ratio, but those who continue with temporary contracts suffer a higher degree of turnover. The rate of growth of part-time employment has increased, especially among the younger generations with a low or medium level of education.

This article analyses the characteristics of workers who are potentially more affected by the COVID-19 crisis and their employment possibilities in other productive sectors. Sectors related to travel, accommodation and food services, leisure and wholesale and retail trade, which have been particularly affected by the measures adopted to limit the impact of the pandemic, concentrate 19.6% of total employment in Spain. On the other hand, sectors related to distribution, logistics and information and communication –demand for which appears to be less affected or might even have increased during the lockdown– account for 7.4% of total employment. Among the workers from sectors that are most affected, the proportion of women, young adults, the lesser-skilled, and workers with less experience and with temporary contracts, is especially high. The analysis based on the tasks performed by workers in the different sectors suggests that the potential mobility of the employees that have been hardest hit by the crisis is scarce, especially in accommodation and food services and in wholesale and retail trade, in part owing to the limited intensity of use in those sectors of tasks associated with information and communication technologies, writing, reading and numerical skills. However, workers in sectors related to shipping and leisure or entertainment activities might have more opportunities of finding a job in other areas. These results point to the need to support training in certain skills for the potentially unemployed in the sectors most affected by the pandemic in order to facilitate their transition to new vacancies.

This article analyses changes in investment by foreigners in the residential real estate market in Spain between 2007 and 2019. Two indicators are used for this purpose: gross purchases by foreigners as a percentage of total transactions and net purchases (purchases less sales) relative to the housing stock. A distinction is made between resident foreigners and non-resident foreigners. Non-resident foreigners who invest in the Spanish real estate market mainly come from high-income European countries, while resident foreigner buyers are mostly from countries from which Spain receives immigration, such as Romania and Morocco. The article also shows how non-resident foreigners concentrated their purchases in the islands and in the Mediterranean coastal provinces, while residents distributed their purchases more evenly throughout Spain. Finally, there is no statistical evidence supporting the hypothesis that investment by non-resident foreigners has in itself contributed significantly to an increase in house prices. However, the high correlation between population growth and the increase in real estate prices suggests that the increase in the foreign population resident in certain provinces, particularly in the islands, appears to have contributed to raising house prices through its effect on the demand for property.

As a result of the boost given to teleworking by the current crisis, this article analyses the potential of this form of work in Spain and the capacity of different socio-demographic groups to benefit from it. According to the Spanish Labour Force Survey, the percentage of the employed who, at least occasionally, work from home amounted to 8.3% in 2019, up 2.4 percentage points (pp) from 2009. By occupation type, remote working is more frequent among the self-employed, small companies and skilled occupations. Furthermore, this form of work is still infrequently used in certain sectors of activity which could have been bolstered by new technological developments, such as manufacturing, public administration, transportation and storage, administrative activities, wholesale and retail trade and other service activities. The types of workers, having taken into account the characteristics of their jobs, who work remotely are usually individuals aged between 35 and 65 and those with university studies. An analysis of the intrinsic characteristics of each occupation estimates that about 30% of persons employed could telework, at least occasionally, and, consequently, there is considerable room for improvement in the application of these working arrangements. However, this potential increase is asymmetrical and not all workers are going to be able to take advantage of these arrangements since those with a lower level of educational attainment will find it difficult to be able to benefit from them.

This article analyses the recent performance of the main Latin American economies (Brazil, Mexico, Argentina, Colombia, Chile and Peru). Economic developments in the region have progressively been influenced by the global spread of the coronavirus COVID-19 pandemic. Although it has reached Latin America with some delay compared to Europe and the United States, it shows a similar pattern of dissemination. Moreover, the region faces this pandemic in an economic situation which had already beforehand shown signs of weakness owing to various idiosyncratic reasons, related in part to the bouts of social tension in the final stretch of last year. Some factors, such as high labour market informality and the improvable quality of some institutions, may act as amplifiers of the impact of the health crisis. From the economic standpoint, the pandemic is affecting the region through various key channels, namely the trade, commodities, tourism, financial and domestic demand channels. The national containment measures, the impact of the pandemic on the population, the global nature of the shock and the differential effects on the region are seeing analysts revise their GDP forecasts for 2020 notably downwards, with a balance of risks tilted to the downside. The monetary and fiscal authorities have responded, swiftly adopting measures. Although the region has in recent years consolidated progressively more robust monetary and fiscal policy arrangements, it has less monetary and fiscal space than at the start of the 2008-2009 crisis. Moreover, the Latin American economies, with the exception of Peru, have notably increased their external debt since 2008, though they have more international reserves than in the previous global crisis. Against this background, the resolute response by national policies should ideally be supported by a coordinated global response, led by the main multilateral agencies and geared to minimising the possible long-term adverse effects on the region’s economies.
Three boxes accompany this report. The first considers the causes and potential effects of the social tensions in some of the region’s countries in the closing months of 2019. The second examines the process of integration of Latin America into global trade and its results, analysing the challenges outstanding if the region is to fully reap the benefits of greater trade integration. The third sets out some simulations made on the basis of a global macroeconometric model to illustrate the potential adverse effects of COVID-19 on economic activity in the main Latin American economies.

According to the Bank Lending Survey, in 2020 Q1 credit supply contracted slightly in both Spain and the euro area, affecting practically all the segments analysed. Demand for loans continued to fall in Spain across the board, although firms’ demand fell at a slower rate than in the prior quarter. In the euro area as a whole, firms’ demand for funds surged, while that of households slowed. Banks expect the COVID-19 pandemic to have a greater impact in 2020 Q2, especially in the case of demand for financing. For instance, they anticipate an upsurge in firms’ demand for loans between April and June, likely driven by their high liquidity needs. Should these expectations materialise, it would be the largest increase in demand recorded in this segment by the survey since it began in 2003. Conversely, amid growing economic uncertainty financial institutions foresee a slump in demand for loans from households. Furthermore, these intermediaries expect to ease credit standards for loans to firms during those months, foreseeably on account of the State guarantee schemes launched in several countries. According to the respondents, the measures adopted by the ECB (expanded asset purchase programme, negative deposit facility rate and TLTRO III) continued to help relax the credit supply terms and conditions and to contribute to a rise in lending volumes.

COVID-19 has spread globally, and most countries have adopted extraordinary measures to mitigate its effects on public health. These include bringing part of economic activity to a standstill and the confinement of the population, and they are exerting a most severe contractionary effect on GDP and employment worldwide. While the resolute action of national and supranational authorities will contribute to alleviating these effects, their magnitude remains, for the moment, highly uncertain.
This article develops a set of scenarios for the Spanish economy that consider various alternative assumptions about the duration of the confinement and the persistence of the shock the economy has undergone. In this connection, two different methodologies are used. The first rests on an assessment of sectoral output losses as a result of the epidemic containment measures; the second is based on simulations of the main transmission channels of the economic effects of the pandemic, using the Banco de España Quarterly Model (MTBE). The results of the different scenarios point to reductions in Spanish GDP in 2020 unprecedented in recent history. That said, the scale of the reductions is highly sensitive to the starting assumptions, over whose plausibility there is much uncertainty. Once the height of the crisis is behind us in the short term, activity should begin to recover at a rate which will in any event depend on how the health risk is perceived in the coming months and on the capacity for recovery of that part of the productive system most damaged by the current shutdown. With a view to 2021, foreseeably the Spanish economy will substantially - but not fully – recoup the course of activity and employment expected before the pandemic.
It is necessary to highlight, in any case, the provisional nature of these calculations. They must be subjected in the coming months to ongoing revision as new information progressively becomes available.

According to the Central Balance Sheet Data Office Quarterly Survey, non-financial corporations’ activity lost momentum in 2019, resulting in a slowdown in job creation. However, the high inflow of dividends contributed to an increase in ordinary profit and, as a result, average levels of return on ordinary activities also grew. In addition, financing costs continued to decline, allowing the spread between the return on investment and this indicator to widen again. Extraordinary costs and revenue had an adverse impact on net profit, triggering a notable decline. Average debt ratios, expressed as both a percentage of assets and as a percentage of ordinary profit, continued to fall in 2019. The share of profits used to service debt also continued to decline and stands at a record low. The article contains a box analysing the recent developments in trade finance and the average supplier-payment and customer-collection periods.

This article describes the main characteristics of the trade agreement reached between the European Union (EU) and the Common Market of the South (MERCOSUR) in 2019 and presents estimates of its possible impact on trade and GDP in the two areas.
It is an ambitious agreement involving the full liberalisation of almost all of the goods trade between the two blocs, facilitating the provision of services and the reduction of non-tariff barriers, and envisaging reciprocal liberalisation of public procurement. Similarly, it includes provisions on the protection of the environment and workers’ rights.
The agreement’s estimated effects on trade and economic activity will be significant for MERCOSUR. The impact for the EU will be more modest, yet always positive, since trade with MERCOSUR is less significant for EU members. Spain is among the EU member countries whose economies will benefit most from the agreement.

This article describes the concept of population at risk of poverty or social exclusion that is used to quantify the targets set in this respect for the countries of the European Union. Drawing on this definition, the article analyses how poverty in Spain has evolved. It also examines the factors that have contributed to poverty levels in Spain still being above the official targets for 2020 and the average of the rest of the countries of the European Union. Lastly, some aspects of the definition are identified that suggest that the concept of economic poverty should be addressed from several complementary standpoints.

In the final stretch of 2019, the funds raised by households and non-financial corporations grew at very moderate rates, somewhat below those recorded in the first half of the year. This occurred against a setting of weak demand for funds, in which credit standards for bank loans had tightened slightly, although the cost of credit declined again, in keeping with the more accommodative monetary policy stance. Deposit institutions’ loan portfolios continued to contract, albeit at a more moderate pace, while their average quality improved, with further reductions in the NPL ratio and in foreclosed assets.

Advances in new technologies give millions of people who experience financial exclusion globally the opportunity to access and use financial services. This article describes the main benefits of financial innovation, particularly in emerging economies. It also identifies the main challenges associated with financial innovation, including the potential effects of digitalisation on financial exclusion, and possible ways to address these.

Population ageing is a major global challenge. The Latin American economies have a younger population structure than other emerging and advanced economies, which has allowed them to enjoy the so-called demographic dividend (a favourable working age/non-working age population ratio). However, according to the latest demographic projections of the United Nations (UN), it is estimated that in 2020 the Latin American population pyramid will resemble that of the advanced economies in 1990 and that, by around 2050, both groups will have similar population profiles. This article documents the current demographic trends in Latin America and discusses the main related challenges, in particular, those arising from the adaptation of social welfare systems to population ageing.

This article analyses the link between the changes in and the drivers of inflation in a broad range of advanced economies, with special emphasis on those of the euro area. Inflation rates are seen to be highly synchronised across countries, especially in the euro area economies, reflecting their close economic and financial links and the common monetary policy. Also, the comovement of inflation is found to be a phenomenon that tends to be more visible in the medium and long-term. At the same time, the synchronisation of core inflation, which is based on products with more stable prices, is seen to be limited. The interdependence of headline inflation, by contrast, is significantly higher and has increased considerably in recent years. The drivers of inflation, according to New Keynesian Phillips curve models, such as inflation expectations, the cyclical position and external prices, also help to explain the relationship between inflation rates in advanced economies and especially in those of the euro area.

The article analyses how labour market participation and the type of work performed change with age. Drawing on data from the OECD’s Programme for the International Assessment of Adult Competencies (PIAAC), it is documented that as people age they gradually lose certain skills relating to their ability to do physical work or use new technologies, or their literacy and numeracy skills. By contrast, as they build up experience, older workers develop better planning skills and a greater ability to supervise the work of others and respond to setbacks. However, the transition between these tasks is not problem-free, especially in certain sectors, such as agriculture, small retail trade, hotels and restaurants and domestic help, which in Spain are more likely to have a higher concentration of older workers with a lower level of education than in the rest of the euro area. In this respect, larger firm size, flexible working environments, retirement schemes with certain specificities relating to skills required in different occupations and an increase in continuing training would all be conducive to a lower decline in productivity and a higher degree of employability of older workers. This is particularly important in Spain’s current demographic context of a gradually ageing population.

According to the Bank Lending Survey, during 2019 Q4, credit standards tightened slightly for all categories of lending in Spain, whereas this only affected consumer credit and other lending to households in the euro area. In this segment, the general terms and conditions on new lending eased, both in Spain and in the euro area as a whole. Furthermore, in Spain, the terms and conditions on loans to households for house purchase tightened slightly. Demand for all types of credit in Spain decreased, whereas in the euro area as a whole loan applications from enterprises declined and those from households increased. According to the responding banks, regulatory and supervisory actions on capital, leverage and liquidity had a negligible impact on credit supply in Spain in the second half of 2019, whereas they prompted a slight tightening in the euro area. The NPL ratio contributed to a tightening of credit standards (in consumer credit in Spain and in the other two segments in the euro area). Lastly, as for the ECB’s TLTRO III (the third series of targeted longer-term refinancing operations), the banks’ participation in the September operation was limited and increased significantly in the December operation, as they were essentially attracted by the favourable conditions of this funding.