3. 2016 GDP projections
3Source: Círculo de Empresarios based on IMF, April 2016
2.4%
EMU
1.5%
-3.8%
2.4%
US
-1% 0.6%
0.5%
6.5%China
India
7,5%
4.9%
Russia
-1.8%
1.9%
Nigeria2.3%
Global GDP
2015 2016
3.2 3.4
4. Obstacles to growth
4
1
2
3
4
5
China’s economic development
Emerging economies adjustment, mainly of
low-income commodity exporters
European political and social scene:
Brexit, refugee crisis…
Global geopolitical risks
Financial markets volatility
5. Slower economic growth
5
Growth is expected to
continue at a moderate
pace
Gradual recovery in
advanced economies and
uncertainty in emerging
markets
Slowdown in China and
robust growth in India
-4
-2
0
2
4
6
8
10
2013 2014 2015 2016* 2017*
Real GDP growth rate in BRICS
%
China India Brazil Russia South Africa
Source: Círculo de Empresarios based on IMF, April 2016
3,3 3,4
3,1
4,1
4,6
0
1
2
3
4
5
6
2013 2014 2015 2016* 2017*
Real GDP growth
%
Emerging Advanced Global
* Projection
Source: Círculo de Empresarios based on IMF, April 2016
6. Global trade slowdown
During 2015, global trade
growth has slowed notably
relative to GDP growth
Source: IMF, April 2016
Trade and Output growth
Annual change
The slowdown has been more
pronounced in emerging
markets
-2
-1
0
1
2
3
World trade (goods)
Quarterly change, % Volumetrade World trade average1997-2007
Source: Círculo de Empresariosbased on ECB, 2016
0
2
4
6
8
1980-2012 2013-15 1980-2012 2013-15
Advanced Emerging
Volumetrade Real GDP
6
7. Weakness in global economic activity
* Indicator that provides an advance signal of waht is happening in the private sector (output, new orders, employment...)
Indicators such as PMI or
industrial production showed a
decline in economic activity
Below 50 signals an economic
activity deterioration
Probability of recession
Source: IMF, April 2016
0
0,2
0,4
0,6
0,8
1
1,2
2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4
Industrial production
Quarterly change
Source: Círculo de Empresariosbased on CPB, 2016
0%
10%
20%
30%
40%
50%
60%
70%
US Eurozone Japan Emerging Asia Latin America Rest of the
world
Probabilityof recession Previousprojection
46
48
50
52
54
56
58
60
2014 2015 Q1 2015 Q2 2015 Q3 2015 Q4 Jan.16 Feb.16
PMI composite*
Global US uk
Source: Markit, 2016
7
8. Emerging: Asia leads global growth
8
-0.47%
-0.11%
Emerging Asia:
• GDP growth-(5,7% vs 5,9%)
• In 2015, 30% of global GDP
and 60% of annual GDP
growth
• The most important
contribution to the region
came from India and
Southeast Asia
46,1 47,2 48,4 49,8 51,1 52,7 53,7 54,7 55,6 56,5 57,1 57,6 58,1 58,7
0
10
20
30
40
50
60
70
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
GDP share of emerging markets
Based on purchasing -power-parity (PPP)
Emerging Asia Latin America Total emerging GDP share
Emerging economies: 57,6%
Advanced economies: 42,42%
Source: Círculo de Empresariosbased on IMF, 2016
-1
-0,8
-0,6
-0,4
-0,2
0
On impact 1 year 2 years
Emerging excluding BRICS
Global
Impact of a 1 percentagepoint decline in BRICS on growth
Source: World Bank, 2016
9. China’s transition to a new growth model
9
Source: Círculo de Empresarios based on IMF, 2016
6.9
6.5
1,8
2015 2016
3,1
Real GDP
Annual change, %
Slowdown in aggregate
economic activity
Robust growth in the services
sector (90% of GDP growth)
Source: Círculo de Empresarios based on Reuters, 2016
Slightly stronger exports in March
External sector
Annual change
2017
6.2
50.5 40.5 9
Services
Industry
Primary
GDP by sectors
%
6.9
Construction
Impact of a 1 percentage point decline in China’s
growth other emerging economies growth
Source: Círculo de Empresarios based on World Bank, 2016
Source: Círculo de Empresarios based on KPMG, 2016
-30
-25
-20
-15
-10
-5
0
5
10
15
2014 1Q-2015 2Q-2015 Jul.15 Aug.15 Sep.15 Oct.15 Nov.15 Dic.15 Jan.16 Feb.16 Mar.16
Exports Imports
-1,2
-1
-0,8
-0,6
-0,4
-0,2
0
Commoditiesexporters Commoditesimporters
10. China: foreign reserves and exchange rate
Source: Círculo de Empresarios based on SAFE, 2016
* Projection
China’s foreign reserves
declined in order to
stabilize the yuan
10
Source: Círculo de Empresarios based on Investing and Reuters ,2016
3,0
3,2
3,4
3,6
3,8
4,0
4,2
may.-14
jun.-14
jul.-14
ago.-14
sep.-14
oct.-14
nov.-14
dic.-14
ene.-15
feb.-15
mar.-15
abr.-15
may.-15
jun.-15
jul.-15
ago.-15
sep.-15
oct.-15
nov.-15
dic.-15
ene.-16
feb.-16
mar.-16
Currency reserves
Trillion $
Yuan exchange rate
-770 billion $
since May-14
2015 2016
In 2016, the chinese yuan
remained broadly stable
37 % of GDP
28 % of GDP*
6,1
6,3
6,5
6,7
6,9
7,1
7,3
7,5
7,7
Yuan-dollar Yuan-euro
11. China: financial system
11
* In February 2016, policy makers injected 340 billion yuan in the financial system
Source: Círculo de Empresarios based on Bloomberg, Investing and Reuters, 2016
China equity markets
The second largest equity market in the world moderate its bearish bets although recent cash injections*
1Q 2016:
Shanghai Composite: -9%
Hang Seng: -3%
2.000
2.500
3.000
3.500
4.000
4.500
5.000
5.500
17.000
19.000
21.000
23.000
25.000
27.000
29.000
31.000
Hang Seng (left axis)
ShanghaiComposite(right axis)
12. India: resilience to resist global growth
12
Source: Círculo de Empresarios based on World Bank, Bloomberg and KPMG, 2016
GDP 2016 projections
%
7,3 7,8 7,9
2015 2016 2017
Growth in India
remained strong
Economic growth was
mostly driven by
domestic demand
5% 7,1%
Unemployment rate Share of global GDP
Primary: 16%
Secondary: 23%
Tertiary: 61%
GDP by sectors
7,1%
Inflation rate
7,8
6,7 6,7
5,8
5,5 5,3
4,6
3,9 3,9 3,8
3,5 3,3
3
13. Japan: 2016 projections
13
1,8
* Japan external debt accounts 10% of total government debt
**In global terms, 5.5 trillion $ in government bonds have negative yields, covering 23% of global GDP
Source: Círculo de Empresarios based on IMF and Bloomberg, 2016
In January, the Bank of Japan
introduced negative interest
rates** in order to stimulate the
domestic demand
Far away from its 2% target and
facing deflationary pressures
from China
GDP
+ 0,5%
Interest rate
- 0,1%
Inflation
-0,2%
Unemployment
3,3%
Public debt*
250%
Growth in Japan fell to 0.6% in 2015+ 80 pp
since 2007
Lowest level since 1995
14. Latin America: growth heterogeneity
* Forecast
* *Chile, Colombia, Peru and Mexico
Pacific Alliance countries
are expected to keep
growth in the region against
Mercosur countries
Higher macroeconomic
imbalances
*
Venezuela
2015: -8%
2014: -5,7%
Source: IMF, April 2016
$ appreciation
Income
losses
Weaker
exports
Inflation
Venezuela
2015: 121,7%
2014: 481,5
Source: IMF, April 2016
0,9
-0,5
-0,9
-6
-4
-2
0
2
4
6
ARG BRA CHI COL PER MEX Mercosur Pacific
Alliance
Latin
America
Real GDP growth
Annual change
2014 2015 2016
Source: Círculo de Empresarios based on BBVA Research, 2016
0
10
20
30
40
ARG BRA CHI COL MEX PER
Inflation
Annual change
2015 2016
Source: BBVA Research, 2016
*
*
*
* Forecast
14
15. Downturn in Brazil has intesified
Source: Círculo de Empresarios based on BBVA Research and World Bank, 2016
Source: Círculo de Empresarios based on Investing, 2016
Output contraction mostly driven by
private consumption and investment
Political tensions and a low approval
government rating (10%)
Inflation rate towards the 4,5% target
GDP and components
%
2/3 of GDP
6,4
10,7
6,8
0
2
4
6
8
10
12
2014 2015 2016
Since April 2015, depreciation higher
than 12%
%Equity markets
Inflation rate
-15
-10
-5
0
5
10
GDP Investment Privateconsumption Exports Imports
2015 2016 2017
70
90
110
130
150
170
190
01.01.2014 23.04.2014 13.08.2014 03.12.2014 25.03.2015 15.07.2015 04.11.2015 24.02.2016
Exchangerate(USD-BRL) 10 years yield
* *
* Forecast
15
16. US: economic growth and labour market
16
Moderate growth in 4Q-15 (1.4%)
against a 2.2% average in the first
three quarters of the year
Dollar appreciation reduced the
external sector contribution to
economic growth
Job growth remained dynamic while
labour force participation improved
over the past few months
GDP and components
%
Recession probabilities intensified in
a 25% for the next 12 months
Labor market
Source: Círculo de Empresarios basesd on BLS, St Louis Fed, 2016
Source: Círculo de Empresarios based on BEA, 2016
Long term unemployment: 27,6%
Thousands
%
-0,9
4,6 4,3
2,1
0,6
3,9
2
1,4
-4
-2
0
2
4
6
8
10
12
14
1Q-2014 2Q-2014 3Q-2014 4Q-2014 1Q-2015 2Q-2015 3Q-2015 4Q-2015
Privateconsumption Investment GDP
5,7
5,5 5,5
5,4
5,5
5,3 5,3
5,1 5,1
5,0 5,0 5,0
4,9 4,9
5,0
4,2
4,4
4,6
4,8
5,0
5,2
5,4
5,6
5,8
0
100
200
300
400
Job growth (left axis)
Unemployment rate (right axis)
Natural rate of unemployment (NAIRU)
17. US: FED monetary policy
The Federal Open Market Committee (FOMC) revised
its policy path to 2 rate hikes in 2016
Positive indicators
• Labour market
• Inflation
• Oil stability
Negative indicators
• Uncertainty about US growth
• Global growth outlook
• Financial markets volatility
Committee members divided on Fed’s rate hike
calendar
Interest rate hike survey, April 2016
April June September December
0 %
53,7 %
19,6 %
40,2%
Source: Bloomberg, April 2016
* In order to conclude the year in the interval [0,75%-1%]
*
Future interest rate hikes will depend on...
17
18. Heterogeneous growth in Europe
7.8
4.1
3.2 2.3 1.7 1.2 0.8
Real GDP growth
%
Ireland Sweden Spain UK FranceGermany Italy
Government debt
%
99.4% 43.2% 99.2% 88.6% 72% 97% 135%
Source: Círculo de Empresarios based on Eurostat and European Commission, 2016
18
19. Eurozone: macroeconomic indicators
19
Economic recovery supported by
domestic demand
1Q 2016: signals of activity
moderation due to euro recent
appreciation, weaker economic
sentiment, emerging markets...
Decline in energy prices further
dampen inflationary pressures
Unemployment rate trended gradually
downwards (16.63 million
unemployed)
Real GDP and inflation rate
%
Unemployment rate by countries
%
Eurozone rate of unemployment
%
European Commission Forecast
0,5
-4,5
2,1
1,6
-0,9
-0,3
0,9
1,6 1,7
3,3
0,3
1,6
2,7
2,5
1,3
0,4 0 0,5
2008 2009 2010 2011 2012 2013 2014 2015 2016
GDP Inflation rate
0
5
10
15
20
25
30
Source: Círculo de Empresarios based on Eurostat and European Commission, 2016
11,6
11,2
11
10,7
10,5
10,4
10,3
2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 jan.16 feb.16
20. Euro area: monetary policy revision
20
Monetary
policy
Interest cut
rate
Deposit facility
cut rate
Expand the
asset purchase
program
Include
investment
grade bonds
issued by non
financial
companies
+ 4 TLTRO*
ECB’s March new measures
ECB cut its main interest rate to 0%
Deposit facility rate cut by 10 bps
to -0,40% (-0,30 prev.)
Monthly expansion of the asset
purchase program to 80 billion €
(60 billion € prev.)
Bonds issued by non financial
companies will be included in the
list of assets that are eligible for
regular purchases
Source: Círculo de Empresarios based on ECB, 2016
* Refinancing operations with a maturity of 4 years
21. Oil prices
Since March-15 oil prices dropped
by more than a 20%
Persistent oversupply and weaking
oil demand
Iran will increase production
to regain market share:
+ 2 mbd
Doha meeting: (17 Apr) : Plan to
prop up oil prices
0
20
40
60
80
100
120
2013 2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Jan.16 Feb.16 Mar.16
Brent and West Texas Intermediate (WTI)
$/bbl
Brent WTI
Source: Círculo de Empresariosbased on IMF, 2016
90
91
92
93
94
95
96
97
98
Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016 Q4-2016
Supply and demand of petroleum and other liquids
Million barrels per day
Supply Demand
Source: Círculo de Empresarios based on EIA, 2016
21
22. US oil production
US production
Mbd
6%
80%
14%
Crude Oil Production (Contribution to total net increase, 2011-2015) US oil and gas investment
% GDP
2004 2014
0.4%
2.1%
+2.8 Tn $
Slightly lower oil production
due to falling oil prices
2011- Apr.15
+70%
Signs of a slowdown in shale oil
production (4.84 million in May*)
4
5
6
7
8
9
10
US
OPEP
Russia
Source: Círculo de Empresarios based on BBVA Research, 2016
Source: Círculo de Empresarios based on BBVA Research, 2016
Source: Círculo de Empresarios based on EIA, 2016
* Forecast
22
23. Commodity prices
23
Nonfuel commodity prices
appear to have stabilized
Impact of commodity prices in global growth
Percentage points
30
50
70
90
110
130
150
2012 2013 2014 2015 2016
Commodity prices evolution
2010=100
Energy Non fuel commodities
Source: Círculo de Empresariosbased on World Bank, 2016
-60 -50 -40 -30 -20 -10 0 10 20 30 40
Brent
Natural Gas
Copper
Aluminium
Iron
Nickel
Corn
Commodity prices
2016
2015
*
SOurce: Círculo de Empresariosbased on Bloomberg, 2016
-2,5
-2
-1,5
-1
-0,5
0
Japan Eurozone US Colombia Peru China Brazil Russia
* Year to date change
Source: Círculo de Empresarios based on World Bank, 2016
24. Energy sector perfomance
24
Higher likelihood of increasing bankruptcies (42 in US in 2015) if there are further declines in
commodity prices
US energy and commodity related sectors
represent 17% of the US high yield market
1Q- 2016:
Moderate recovery
*Goldman Sachs Commodity Index: Benchmark which measures commodity prices performance
SOurcee: Círculo de Empresarios based on S&P, Fitch and Reuters, 2016
*
50
60
70
80
90
100
110
120
Energy sector in the financial markets
6 April 2015=100
S&p 500 Energy GSCI
25. Currency markets
25
Recent depreciation of the
dollar
Euro appreciation was driven by
a moderate pace of further
funds rate in US
Change in exchange rates
YTD
BREXIT
RISK
Source: Círculo de Empresarios based on Investing y Bloomberg, 2016
Euro exchange rate to dollar and british pound
%
-30 -10 10 30 50 70
Venezuelan bolivar
Argentinepeso
Pound
Mexican peso
Chineseyuan
Swissfranc
Euro
Canadian dollar
Russian ruble
Brazilian real
Japaneseyen
0,62
0,64
0,66
0,68
0,7
0,72
0,74
0,76
0,78
0,8
0,82
0,95
1
1,05
1,1
1,15
1,2
1,25
Pound (right axis) Dollar (left axis)
26. Equity markets
26
Equity markets
%
Source: Círculo de empresarios based on Investing and Bloomberg, 2016
In early 2016, losses in equity
markets specially for the banking
sector
Equity markets
January 2015=100
Between December and
January, Euro Stoxx banks lost
35% of its capitalization
60
70
80
90
100
110
120
130
02.01.2015 13.03.2015 26.05.2015 04.08.2015 13.10.2015 22.12.2015 03.03.2016
Eurostoxx 50 Ibex 35 S&P 500
-20 -15 -10 -5 0 5 10 15 20
Bovespa (Brazil)
Dow Jones (US)
S&P 500 (US)
FTSE100 (UK)
Nasdaq (US)
CAC40 (France)
PSI (Portugal)
Dax (Germany)
Ibex 35
Nikkei (Japan)
Shangai Comp.(China)
28. Boosts to growth
28
1
2
3
4
5
Oil prices
Financial costs
Expansionary effects
of economic policies
Improvement in the labour market
Exports to European markets
29. Forecasts: recovery continues…
29
2016* 2017*
2.7%
2.3%
*Forecasts
Source: Bank of Spain, March 2016
IMF, April 2016: GDP growth = 2.6% in 2016
… but at a moderate pace
3.2%
2015
30. Growth in 2016
30
January 2016:
Trend change
The Economic Sentiment Indicator (European Commission) has fallen since January
60
70
80
90
100
110
120
2007M03
2007M07
2007M11
2008M03
2008M07
2008M11
2009M03
2009M07
2009M11
2010M03
2010M07
2010M11
2011M03
2011M07
2011M11
2012M03
2012M07
2012M11
2013M03
2013M07
2013M11
2014M03
2014M07
2014M11
2015M03
2015M07
2015M11
2016M03
Economic Sentiment Indicator, March 2016 EU-28
Eurozone
Spain
Source:European Commission, 2016
31. Forecasts 2016: composition of growth
31
GDP annual growth in 2016 = 2.7%
• Private consumption = 2,9%
• Public consumption = 1%
• GFCF = 5%
• Exports = 4.4%
• Imports = 5.3%
Domestic demand
0.2 pp
2.9 pp
External demand
contribution to growth
contribution to growth
Source: Círculo de Empresarios based on Bank of Spain, 2016
32. GDP growth
32
Despite domestic and global uncertainties, Spain overtakes the eurozone and
the OECD growth
Forecast 1Q 2016
0.7% quarterly change
-6
-4
-2
0
2
4
6
2006 Q4 2007 Q4 2008Q4 2009 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014 Q4 2015 Q4
GDP growth
%, annual change Eurozone
OECD
Spain
Source:Círculo de Empresarios basedon OECD 2016
36. Incompliance of the deficit target
36
In 2015, the public deficit
exceeded by 0.8 pp the
Stability Pact target of -4.2% …
… due to the incompliance of
14 regions and the deficit in
Social Security
-2,7 -2,64
-2,52 -2,51
-2,13
-1,67
-1,53 -1,52 -1,38 -1,36 -1,33 -1,28
-1,13 -1,13
-0,69 -0,57 -0,54
Catalonia
Extremedura
Murcia
ValencianC.
Aragon
Castile-LaMancha
Asturias
Balearic.Islands
Cantabria
Madrid
CastileandLeon
Navarra
Andalusia
LaRioja
Basque.C
Galicia
CanaryIslands
Deficit, 2015
% GDP
Source:MinistryTreasury and Public Administrations,2016
TARGET
-0.7%
Balance by administration, 2015
% GDP
2014 2015 Objetivo 2015 ▲2015/Target 2015
Central -3.67 -2.53 -2.9 0.37
Autonomous Communities -1.75 -1.66 -0.7 -0.96
Local Corporations 0.57 0.44 0 0.44
Social Security -1.04 -1.26 -0.66 -0.6
Total - including bank aid -5.89 -5.24
Total -5.79 -5 -4.2 -0.81
Source: Treasury, 2016
37. Debt: high public debt
37
Source: Círculo de Empresarios based on Bank of Spain, 2016
Since 2007, public debt increased by 180%.
Public and private debt
% GDP
Private debt fell by more than 20% since 2009.
EUROZONE
Public debt: 94.2%
Non-financial corporations debt: 133%
Households debt: 61%
35,5
39,4
52,7
60,1
69,5
85,4
93,7
99,3 99,2
80,7 81,4 83,4 82,8 81,1
79,7
75,9 71,9 67
108,8
113 115,5 115,1
111,5
105,4
98
90,5
84,9
20
40
60
80
100
120
140
2007 2008 2009 2010 2011 2012 2013 2014 2015
PPAA Households Non-financial corporations
38. Debt in regional administrations 2015
38
Galicia
18.6%
Debt, 4Q 2015
% regional GDP
Asturias
18%
Cantabria
22%
Basque C.
14.4%
La Rioja
18%
Navarre
18.2%
Aragon
20.5%
Catalonia
35.2%
Valencian C.
41.3%
Murcia
27.4%
Andalusia
21.6%
Balearic Islands
30.2%
Canary Islands
15.7%
Extremadura
20.3%
Castile and Leon
19.5%
Madrid
13.6%
Castile-La Mancha
35.6%
Source: Círculo de Empresarios based on Bank of Spain data, 2016
> 15%
>10%
> 30%
> 20%
Total
24.2% national GDP
24.4% total debt
39. Social Security
Source: Círculo de Empresarios based on Ministry of Employment and Social Securuty, 2016
Social Security Reserve: withdrawals
Millions €
2015 Total
withdrawals:
13,250 millions €
1.700
1.363
3.530
410
3.500
1.000 1.000
720
5.000
428
5.500
500
8.000
1.300
3.750
7.750
1.750
0
1.000
2.000
3.000
4.000
5.000
6.000
7.000
8.000
9.000
2014 Total
withdrawals:
15,300 millions €
2013 Total
withdrawals:
11,648 millions €
2012 Total
withdrawals:
7,003 millions €
Balance:
32.481
millones €
The Social Security Reserve Fund could run out of resources in 2019 if the withdrawals persist.
39
40. Exports
40
January 2016 (annual change)
▲ 2.1% (18,267.3 M€)
Imports ▲ 0.8% (20,653.9 M€)
Trade
balance
▼ 8.1% in deficit (2,386.6 M€)
▼ 18.9% in energy deficit
(68.6% of total)
Geographic distribution (%)
SECTORS: TOP 3
ExportsImports
EU
Rest of
Europe
5.1%
69%
EU
Rest of
Europe
54.8%
5.9%
China
10%
Source: Círculo de Empresarios based on Ministry of Economy and Competitiveness, March 2016
External sector
Exports % / total Imports % / total
Capital assets 18.8 Capital assets 20.7
Automobile 18.0 Chemistry 16.1
Food, beverage and
tobacco
17.8 Automobile 13.9 EUROPE
60,6
ASIA
20,6
AMERICA
10
AFRICA
8,5
Other
0,3
EUROPE
74,1
AMERICA
9,6
ASIA
8,7
AFRICA
6,1
Other
1,5
41. Risk premium
41
Markets volatility, mainly in the banking sector, and political uncertainty explain
the risk premium development
0
20
40
60
80
100
120
140
160
180
0
0,5
1
1,5
2
2,5
3
3,5
Ten years bond yield. Spain and Germany (%)
Risk premium (bp)
Spain Germany Risk premium
Source: Círculo de Empresarios based on Bank of Spain data, 2016
42. Spain´s position in international rankings
42
Switzerland
Norway
Sweden
SPAIN
1
2
3
7
Hong Kong
Singapore
N. Zeland
SPAIN
1
2
3
43
Switzerland
Netherlands
Sweden
SPAIN
1
2
3
24
Finland
Iceland
Sweden
SPAIN
1
2
3
6
Denmark
Finland
Sweden
SPAIN
1
2
3
36
The Energy Architecture
Performance Index 2016
European Patent Applications
Ratio applications to population, 2015
2016 Index of
Economic Freedom
2016 Environmental
Perfomance Index
Corruption Perception Index
2015
Source: Global Energy Architecture
Performance Index Report 2016, WEF, 2016
Source: The Heritage Foundation, 2016
Source: Annual Report 2015,
European Patent Office, 2016
Source: Yale University, 2016
Source: Transparency International. 2016
N. Zeland
Sweden
South Africa
SPAIN
1
2
3
27
The Open Budget Index 2015
Source: International Budget Partnership, 2016