Banco Bilbao Viscaya Argentaria Maps Growth Risks as Spain, Mexico and Turkey Diverge

Banco Bilbao Viscaya Argentaria (NYSE:BBVA) economists said the bank’s core markets are navigating a global backdrop shaped by geopolitical uncertainty, artificial intelligence investment and shifting trade patterns, with Spain showing resilient growth, Mexico facing weak investment but strong exports, and Turkey continuing a gradual disinflation program.

Speaking during a BBVA Strategic Talks event, Jorge Sicilia, BBVA’s chief economist, said the global outlook is being influenced by “two tectonic forces”: geopolitical concerns and the transformation being driven by AI. He cited conflicts, strategic rivalry, tariffs, protectionism, defense spending and strategic autonomy as increasingly important factors in economic analysis.

Sicilia said recent attacks involving Iran, the U.S. and Israel were changing geopolitical dynamics and affecting oil and other prices, although BBVA still views current geopolitical risk as lower than levels seen in previous months. He said BBVA’s baseline assumes oil prices decline going forward, while noting that the path could change quickly if conditions deteriorate.

BBVA expects the U.S. economy to grow by more than 2% over the next two years, while the Eurozone is expected to face more pressure. Sicilia said BBVA recently revised down its Eurozone outlook due to a larger expected impact from developments around the Strait of Hormuz and volatility in Irish growth data. He added that AI-related investment is supporting U.S. growth and creating spillovers through import demand.

Spain Outlook Remains Supported by Services and Domestic Demand

Miguel Cardoso, chief economist for Spain and Portugal at BBVA Research, said Spain’s current expansion is expected to continue, with GDP forecast to grow 2.4% in 2026 and 2.1% in 2027. He said BBVA estimates current quarter-on-quarter growth at 0.7%, keeping annualized growth between 2.5% and 3%.

Cardoso said Spain has not seen the slowdown BBVA previously expected from foreign uncertainty and higher oil prices. However, a weaker Eurozone outlook is weighing on Spanish goods exports, which BBVA expects to fall 1.2% this year before recovering in 2027.

Services remain a key offset. Cardoso said tourism-related spending by nonresidents is growing at around 10% year over year, supported in part by geopolitical risks redirecting travelers to Spain. He also pointed to strong growth in non-tourism services, including information and communication technologies, transport, business services, engineering, financial services and trade-related services.

Immigration is another important driver, according to Cardoso. BBVA expects Spain to create between 450,000 and 550,000 jobs annually in 2026 and 2027. He also said household consumption should remain supported by real disposable income growth of roughly 2% to 2.5%, rising housing wealth and relatively low interest rates.

Cardoso highlighted housing as a major structural challenge. BBVA estimates Spain’s housing deficit, measured by the gap between household formation and new units being built, could reach about 800,000 units by 2027 or 2028. He said even an acceleration in residential investment would be enough only to stabilize the deficit.

Mexico Faces Low Growth but Benefits From U.S. Trade Access

Carlos Serrano, chief economist for Mexico at BBVA Research, said Mexico is going through a phase of low growth. He said growth in 2025 was 0.7%, and first-quarter data showed a 0.6% quarter-on-quarter contraction. BBVA expects Mexico’s economy to grow 1.2% this year and 1.8% next year.

Serrano attributed the slowdown mainly to declining investment. He said investment fell 3% in the first quarter compared with the same period a year earlier, after already falling 6.5% in that prior period. Since July 2024, he said, investment has declined around 8%.

He said uncertainty around institutional issues, particularly how Mexico’s new judicial system will work, has been a key factor. Fiscal consolidation and lower public investment have also weighed on growth.

At the same time, Serrano said Mexico’s export performance has been strong because of its favorable tariff access to the U.S. market. He said 82% of Mexican exports to the U.S. were tariff-free last year under USMCA rules, excluding Section 232 tariffs on areas such as autos, steel and aluminum.

Exports through May were growing 28%, Serrano said. Auto exports were roughly flat and down 0.5%, partly because of flat U.S. demand and a 25% tariff in the sector. By contrast, exports of computer equipment rose 73% from January to May, which Serrano linked to Mexico’s role in AI-related investment supply chains.

Serrano also said Mexico’s government has awarded 37 contracts to private companies to generate clean electricity, a development he described as positive because energy supply has been a bottleneck for attracting investment and taking advantage of nearshoring opportunities.

Turkey Continues Gradual Disinflation Program

Seda Güler, chief economist for Türkiye at BBVA Research, said Turkey is in the third year of its inflation program, with the policy preference remaining a moderation in GDP growth rather than a sharper slowdown. BBVA sees growth of about 3%, compared with its estimate of potential growth of 4% to 4.5%.

Güler said year-over-year CPI reached 32% in June, and BBVA forecasts 30% inflation by the end of the year, with a limited downside bias toward about 29% if oil prices remain lower. She said the real appreciation of the currency has been the main anchor for disinflation, while real rates will need to remain high to keep the process on track.

She said the Central Bank of Turkey is using a broader monetary stance that includes policy rates, deposit rules and credit rules. Deposit rates remain above the central bank’s cost of funding, while credit growth is being managed below the inflation trend through tighter monthly caps and fewer exceptions.

Güler said demand for Turkish lira assets is increasing, including through swaps, and foreign inflows have returned after significant outflows in March. She also noted improvements in central bank reserves, with gross reserves reaching above $160 billion by the end of the prior week.

Policy Risks and Credit Growth Discussed in Q&A

In response to analyst questions, Cardoso said Spain’s most urgent policy priorities include addressing the housing shortage, unlocking investment in electricity distribution and renewable infrastructure, and reducing the country’s structural fiscal deficit, which he said is a little above 3% of GDP.

Serrano said Mexico’s main productive capacity constraint is energy, not firm-level spare capacity. He added that domestic uncertainty around judicial reform appears to be a larger constraint on investment than USMCA uncertainty.

On credit, Serrano said BBVA Research expects Mexican systemwide credit growth to slow to around 5% to 6% this year, with consumer credit near 10% and corporate credit around 4%. Cardoso said Spanish mortgage credit is growing around 4%, while firm credit is growing around 3%, with potential upside in construction and real estate. Güler said credit caps in Turkey remain binding, with Turkish lira lending likely to move roughly in line with inflation this year and selective easing possible next year.

About Banco Bilbao Viscaya Argentaria (NYSE:BBVA)

Banco Bilbao Vizcaya Argentaria (NYSE:BBVA) is a Spanish multinational financial services group headquartered in Bilbao, Spain. The bank traces its roots to several historic regional banks and was formed through a series of mergers that consolidated its position as one of Spain’s largest banking groups. BBVA operates as a universal bank offering a broad range of financial services to retail, corporate and institutional clients.

BBVA’s core businesses include retail and commercial banking, corporate and investment banking, private banking and wealth management, asset management, and insurance.