The Spanish economy in 2014 April 2014
World growth at differents speeds Forecasted real GDP growth in 2014 Changes in IMF forecasts for 2014 GDP growth since last summer Source: International Monetary Fund (IMF), January 2014. Equipo Económico. 2
Activity is expected to improve further in 2014 World economic outlook in 2014 2012 2013 2014* 2015* 2014* Inflation General government net lending/borrowing World Output 3.1 3.0 3.7 3.9 3.7 - - Current account balance Advanced Economies 1.4 1.3 2.2 2.3 1.9-3.5 0.1 United States 2.8 1.9 2.8 3.0 1.6-4.6-2.8 Euro Area -0.7-0.4 1.0 1.4 1.3-2.5 2.4 Germany 0.9 0.5 1.6 1.4 1.7-0.1 5.7 France 0.0 0.2 0.9 1.5 1.4-3.5-2.5 Italy -2.5-1.8 0.6 1.1 1.1-2.0 2.0 Spain -1.6-1.2 0.6 0.8 1.0-5.7 2.6 United Kingdom 0.3 1.7 2.4 2.2 2.3-5.7-2.2 Emerging Market and Developing economies GDP 4.9 4.7 5.1 5.4 5.5-2.2 0.8 Developing Asia 6.4 6.5 6.7 6.8 4.5-3.0 1.3 Latin America 3.0 2.6 3.0 3.3 6.3-3.6-2.3 Brazil 1.0 2.3 2.3 2.8 5.8-3.2-3.1 Mexico 3.7 1.2 3.0 3.5 3.1-4.0-1.4 Sub-Saharian Africa 4.8 5.1 6.1 5.8 5.7-3.0-4.0 Source: IMF, January 2014. 3
in a world of free money Evolution of interest rates Source: ECB, Federal Reserve, Central Bank of Japan. 4
A significant appreciation of the Euro vs. US dollar and Japanese Yen in 2013 Evolution of Euro exchange rates Source: European Central Bank, Equipo Económico. 5
Commodities prices remain elevated compared with historical levels Evolution of primary commodities prices indices Source: IMF, Equipo Económico. 6
The pickup in US growth in 2014 will be carried by domestic demand Main figures - United States 2012 2013 2014* 2015* GDP 2.8 1.9 2.8 3.0 Inflation 0.8 0.4 1.6 1.3 Volume of imports of goods and services 2.2 1.4 3.4 4.5 Volume of exports of goods and services 3.5 2.3 3.5 3.7 Unemployment rate 8.0 7.5 7.3 6.9 General government net lending/borrowing -8.3-5.7-4.6-3.9 Current account balance -2.7-2.6-2.8-2.8 Source: IMF;*Forecast. 7
Several US states are experiencing strong growth Real GDP growth by states in 2012 Unemployment rates by states in 2013 Source: Bureau of Economic Analysis (June 2013), Bureau of Labor Statistics. 8
Growth in Latin America to remain in low gear in 2014 Main figures - Latin American economies 2012 2013 2014* 2015* 2014* GDP Inflation General government net lending/borrowing Current account balance Argentina 1.9 3.4 2.7 2.7 10.8-4.0-0.7 Brazil 1.0 2.3 2.3 2.8 5.8-3.2-3.1 Chile 5.6 4.4 4.4 4.5 3.0-0.2-3.9 Colombia 3.9 3.7 4.1 4.4 2.9-0.7-3.2 Mexico 3.7 1.2 3.0 3.5 3.1-4.0-1.4 Peru 6.2 5.3 5.7 5.8 2.2 0.2-5.0 Source: IMF; *Forecast. 9
Latin America performed better than the developed economies during the crisis, particularly Peru, Chile and Colombia Evolution of GDP in Latin America vs. Developed countries Evolution of GDP in main Latin American countries Source: IMF; *Forecast. Equipo Económico. 10
Euro area is turning the corner from recession to recovery Main figures - Selected European economies 2012 2013 2014* 2015* 2014* GDP Inflation General government net lending/borrowing Current account balance France 0.0 0.2 0.9 1.5 1.4-3.5-1.5 Germany 0.9 0.5 1.6 1.4 1.7-0.1 5.7 Greece -6.3-4.1 0.6 2.9 0.5-3.2-0.4 Italy -2.5-1.8 0.6 1.1 1.1-2.0 0.2 Portugal -3.2-1.7 0.7 1.4 0.9-3.9 0.8 Spain -1.6-1.2 0.6 0.8 1.0-5.7 2.6 UK 0.3 1.7 2.4 2.2 2.3-5.7-2.2 Sweden 0.9 0.8 2.2 2.2 1.9-1.4 5.5 Source: IMF; *Forecast. 11
A slight growth recovery in the European economies Evolution of GDP in selected EU countries Source: IMF; *Forecast. Equipo Económico. 12
Overall improvement in the European current accounts Current account evolution in terms of GDP in selected EU countries Source: IMF; *Forecast. Equipo Económico. 13
Expectations of a prolonged period of low inflation in Europe Prices evolution in selected EU countries Source: IMF; *Forecast. Equipo Económico. 14
Strengthening the European Union: towards a European banking union European Monetary Union Single European Book EU28 2013 Single Banking Supervision by ECB European Economic Union EUROPEAN UNION EUROPEAN BANKING UNION 2013/2014 Single Bank Resolution Mechanism and Fund 2014? Democratic legitimacy Single Deposit Insurance Scheme???? Source: Equipo Económico. 15
The economic crisis has already bottomed out in Spain Spanish macroeconomic outlook 2012-2015 2012 2013 2014* 2015* Real GDP -1.6-1.3 1.0** 1.5** Private consumption -2.8-2.6 0.2 0.4 Public consumption -4.8-2.3-2.9-3.8 Gross fixed capital formation -6.9-6.1 0.2 2.0 National Demand -4.1-3.2-0.4-0.1 Exports of goods and services 2.1 5.7 5.5 6.9 Imports of goods and services -5.7-0.3 2.4 4.7 Total employment -4.8-3.4-0.2 0.5 Unit Labor Costs -3.0-1.6-0.6-0.1 Unemployment rate 25.0 26.6 25.9 25.8 Public Deficit (% GDP) -6.8-6.6-5.8-4.1 Source: Ministry of Economy and Competitiveness, Ministry of Finance and Public Administration; * Forecast.** According to latest Government forecasts. 16
After a double-dip recession in recent years, the Spanish economy has turned the corner Evolution of GDP in Spain and the EU Evolution of GDP and prices in Spain Source: IMF, Bank of Spain; * Equipo Económico Forecast. 17
A recovery in the synthetic indicator of activity in 2013 Evolution of the synthetic indicator of activity Source: Ministry of Economics and Competitiveness, Equipo Económico. 18
The retail trade index attained positive rates in September after 38 months in negative territory Evolution of the retail trade index Source: National Institute of Statistics (INE), Equipo Económico. 19
Slight improvement in the economic confidence indicators in 2013, but still below 50 Evolution of the consumer confidence indicators Source: CIS, Equipo Económico. 20
A significant growth in Spanish companies capitalization since 2012 Evolution of IBEX Index capitalization Source: BME, Equipo Económico. 21
The Spanish unemployment rate doubles the EU average European vs. Spanish unemployment rate Source: IMF, Equipo Económico, * Forecast. 22
Main areas of employment destruction: construction, manufacturing industry, retail and wholesale trade. Cluster Nº of jobs destroyed (in thousands) 2008-2013 Real GDP -12,9 Extractive Industry -15,8 Manufacturing Industry -744,7 Energy syupply 2,0 Water supply -10,1 Construction -1.202,3 Employment destruction in the Spanish economy between 2008 and 2013 by areas Retail and wholesale trade, motors vehicles repair -359,9 Transport and storage -165,5 Hotels ans Catering -98,8 Communication and Information -60,5 Financial activity and insurance -36,2 Real estate activity -16,5 Professional scientific research -68,8 Administration activities -63,6 Public Administration, Social Security, Defense -95,6 Education -62,6 Health care and social services 22,4 Entertainment activities, arts, -21,9 Other services -18,9 Households activities -72,8 Extra-territorial organisations activities Source: INE, Equipo Económico. 4,2 Total -3.098,6 23
A latter adjustment in the public employment Evolution of the number of employees: public vs. private sector Source: INE, Equipo Económico. 24
After 5 years, the Spanish economy is beginning to create jobs Evolution of number of employees Evolution in february of the affiliation to Social Security Source: INE, Bank of Spain, Equipo Económico. 25
Despite the high unemployment rate, Spain still has a strong base of employment Number of employees in the Spanish economy Source: INE, Equipo Económico. 26
A reduction in the number of dismissal plans in 2013 Evolution in the number of dismissal plans and workers affected Source: INE, Equipo Económico. 27
A significant decrease in the Spanish labor costs Evolution of nominal unit labor costs in selected EU countries Source: Eurostat, Equipo Económico; *Forecast. 28
The case of reindustrialization in Spain Production in Industry in EU28, Germany and Spain Source: Eurostat. Federal Republic of Germany (FRG). 29
The Spanish fiscal adjustment in 2012 and 2013 is the second largest within advanced economies Change in cyclically-adjusted budget balance 2012-2013 Source: IMF; Fiscal Monitor 2013. 30
although the fiscal challenge remains significant Evolution of Public expenditure vs revenue Source: INE, Equipo Económico. (*) Financial assistance not included. 31
A significant drop in Corporate Tax revenues in Spain since 2007 Evolution of tax revenue 1995-2013 Source: AEAT, Equipo Económico; * Forecast. 32
A European benchmark of total public revenue and expenditure Total revenue /expenditure as percentage of GDP in 2013 in selected EU countries Source: Eurostat, Equipo Económico. 33
Evolution of the private vs. public debt Private debt in selected EU countries General government gross debt in selected EU countries Source: Eurostat, Equipo Económico. 34
Public accounts are not the same in all the Autonomous regions, and neither is its consolidation effort Public deficit vs. Fiscal consolidation in Spanish regions Source: Equipo Económico. 35
Spanish financial system reform Provisions for losses made by Spanish deposit entities Financial cost of the banking crisis Source: Bank of Spain, Spanish Banking Association, Equipo Económico. 36
Consolidation of the Spanish financial system: Banks and Saving Banks 2009 2014 54 entities + Credit Cooperatives + Other domestic financial institutions (mainly private banking) + Foreign banks branch offices 17 entities + Credit Cooperatives + Other domestic financial institutions (mainly private banking) + Foreign banks branch offices Source: AEB, CECA, Equipo Económico. 37
Evolution in the credit to the private and to the public sector Financing of resident non-financial sectors in Spain Source: Bank of Spain, Equipo Económico. 38
Very positive effects achieved by the Payments to suppliers mechanism and Regional liquidity mechanism Total funds available to support the liquidity of regions and local governments in 2012-2013 million euros 2012 2013 Total 2012-2013 CCAA (Autonomous Communities) FLA - Regional liquidity mechanism 16.638 19.809 36.447 Payments to suppliers mechanism 17.705 12.558 30.263 EELL (Local Governments) Payments to suppliers mechanism 9.598 1.965 11.563 TOTAL 78.273 Source: Ministry of Finance and Public Administration. 39
A significant reduction in the Spanish bond risk premium in recent weeks Evolution in the risk premium in Spain and 10-year Spanish bond interest rate Evolution of risk premium in Europe Source: Ministry of Economy and Competitiveness, Equipo Económico. 40
In Q3 housing price index was back to positive rates after 13 quarters Housing price index evolution Source: INE, Equipo Económico. 41
The Spanish economy has experienced an unprecedented structural adjustment without currency devaluation Current account evolution in terms of GDP Source: Eurostat. * Forecast. 42
The export sector has played an important role in recent years Evolution of the Exports over GDP ratio in main EU economies Source: UNCTAD. 43
and it has still an important role to play in fostering domestic demand through investments Spanish exports of goods and services vs Investments in machinery and equipment Source: INE, Equipo Económico. 44
The Spanish external sector has performed better than most of its main European competitors Evolution of global Spanish exports of goods and services compared to main EU competitors Evolution of Extra EU exports of good and services in main EU countries Source: UNCTAD, Eurostat, Equipo Económico. 45
A strong growth of Spanish exports towards more dynamic markets Evolution of Spanish exports of goods from January to December 2013 Source: Ministry of Economy and Competitiveness, Equipo Económico. 46
Foreign investment is coming back to Spain Evolution of the Spanish financial account Source: Banco de España, Equipo Económico. 47
Spain an important destination for FDI Inward FDI stock in % GDP - 1996 and 2012 Inward FDI stock in 2012 by origin countries Source: UNCTAD, Equipo Económico. 48
Spain dramatically increased its investments abroad since mid 90s Gross Spanish investments abroad - Stock Outward FDI stock as % GDP in 2012 Source: UNCTAD, Ministry of Economy and Competitiveness, Equipo Económico. 49
Priority markets for the internationalization of the Spanish economy Spanish global position abroad III I IV II Source: Instituto de Empresa Familiar, Equipo Económico. 50
The Spanish economy in 2014 April 2014