During the fourth quarter of 2012, the slowdown in world economy eased compared with previous quarters, although, as we shall see below this more positive mood is not applicable to all areas.
The agreements reached during the year by authorities in Europe appear to have paid off in the fourth quarter, when the markets performed positively and financial tensions eased. Even though sovereign risk premiums remain high in certain countries, the measures taken have dissipated doubts about the risk of breakup of the euro. The Troika (the European Commission, International Monetary Fund and European Central Bank) reached new agreements with the government of Greece. Furthermore, the first steps have been taken to set up single banking supervision, which is considered key to breaking the link between sovereign and banking risk. Nonetheless, the euro zone has not been able to avoid further contraction of growth in the fourth quarter, in fact slightly higher than in the previous quarter.
The United States economy performed better in the latter part of 2012 than in the earlier part of the year. Growth in the third quarter was surprisingly positive (up 0.8% quarter-on-quarter) and seems to have carried on into the fourth quarter, with industrial activity recovering after the effects of Hurricane Sandy, more upbeat consumption and the construction sector continuing to improve. The labor market is continuing to create jobs, though not strongly enough to bring down the unemployment rate to any significant extent (it has only fallen by a few tenths of a point below 8%). In any event, the overriding sensation in the quarter has been one of uncertainty (and the feeling continues) regarding the measures the U.S. will finally take to address the hefty imbalance in its public accounts and its debt limit. The country’s economic recovery will depend on how these two questions are resolved.
In the latter part of 2012, the Mexican economy continued with the trend of gentle slowdown which began at the start of the year. In the third quarter, the economy grew by 0.5% quarter-on-quarter. This trend appears to have continued in the fourth quarter, underpinned by domestic demand, given that exports were negatively affected by uncertainty about how the “fiscal cliff” situation will be resolved in the United States.
In South America, activity picked up in the final part of 2012, given the impact of the financial tensions during the first part of the year on the foreign sector and lower consumption coming from advanced economies. Domestic demand remains strong and inflation is generally within the ranges established by central banks.
In Turkey, the process of correcting its imbalances continues. Inflation has slowed significantly, enabling monetary policy to be eased and therefore providing greater support for domestic demand. Turkey’s current account balance has also improved, and in the final part of the year there has been a more positive mood on the financial markets. However, this has not prevented business activity from slowing in 2012.
Finally, the most recent economic data for China show that the slowing trend has been broken, in a quarter marked by the change of leadership in the country. The figures point to stabilization in the sectors most impacted by global slowdown, and an overall recovery in exports and activity compared with preceding quarters.
With respect to exchange rates, there was an appreciation in the average and final exchange rates year-on-year, in most of the currencies that are relevant to the Group. During the quarter, however, there was depreciation in the average and final exchange rates of all currencies with an influence on the Bank’s financial statements. As a result, the impact of foreign currencies on the Group’s balance sheet, activity and earnings is negative in quarterly terms, but positive year-on-year.