Economy in the shadow of geopolitics-Quarterly-Report-February-2024-Circulo-de-Empresarios

F E B R U A R Y
2 0 2 4
Economy
in the shadow of
geopolitics

ECONOMY IN THE SHADOW OF GEOPOLITICS
3.5 3.1 3.1 3.2
8.7
6.8
5.8
4.4
2022 2023 2024* 2025*
GDP
Inflation
Summary
Global economic situation
Global economic activity has maintained some dynamism in recent quarters in a regionally asymmetric manner,
despite the impact of tight monetary policies, the fragmentation of trading blocs, the withdrawal of fiscal support in
a high debt environment, low productivity and geopolitical uncertainties.
Against this background, the IMF forecasts moderate global GDP growth of 3.1% in 2024* and 3.2% in 2025*, lower
than the average of 3.8% between 2000-19. It also expects consumer prices to continue to moderate to 5.8% in
2024*, down one percentage point year-on-year.
3
3.1%
y-o-y
5.8%
4.4% in 2025*
Global GDP 2024*
3.2% in 2025*
(OECD: 2.9% in 2024* and 3% in 2025*)
Inflation 2024*
y-o-y
Source: Círculo de Empresarios based on IMF, OECD and Oxford Economics, 2024.
% y-o-y change
* Forecasts

1
2
4
5
6
3
7
8
Despite moderation in headline inflation, downward resistance in core inflation and possible
second round effects via wages
Economic disengagement due to trade tensions following Russia's invasion of Ukraine, Red
Sea conflicts and geo-economic fragmentation
UNCERTAINTY
AND VOLATILITY
ON THE GLOBAL
STAGE
Challenges for the global economy
High public debt with GDP slowing down
4
Complex geo-economic and geopolitical environment: wars in the Middle East and Russia-Ukraine,
Houthi attacks in the Red Sea, China-US tensions over Taiwan's status quo, Iran's uranium
enrichment programme ...
Continued tightening of financial conditions, with higher financing costs for companies,
households and governments
Slowdown in China's economy, which accounted for more than 40% of global growth in the
decade before COVID
Climate risks
Decisive electoral processes in the US, EU, Russia, India and Taiwan
Impact of the tightening of fiscal policies, in particular in Europe with the return of fiscal rules
9

4.1
4.1
4.2
2023
2024
2025
Emerging
and
developing
1.6
1.5
1.8
2023
2024
2025
Advanced
3.1
3.1
3.2
2023
2024
2025
World
Global growth prospects
Source: Círculo de Empresarios based on IMF, 2024.
Divergence across regions and economies and
high uncertainty persist
5
IMF forecasts
2.5 2.1 1.7
2023 2024 2025
US
0.5 0.9
1.7
2023 2024 2025
Eurozone
2.0
2.9
4.2
2023 2024 2025
Middle East and
Central Asia
2.5 1.9 2.5
2023 2024 2025
Latin America and
The Caribbean
3.3 3.8 4.1
2023 2024 2025
Subsaharan Africa
5.4 5.2 4.8
2023 2024 2025
Emerging and
developing Asia

3.9
4.7
8.7
6.8
5.8
4.4
1.7
3.1
7.3
4.6
2.6
2.0
6.0 5.9
9.8
8.4
8.1
6.0
1
2
3
4
5
6
7
8
9
10
Average 2000-
20
2021 2022 2023 2024* 2025*
World
Advanced
Emerging and developing
Falling inflation and expected interest rate cuts
6
Inflation in advanced economies is converging to the targets of
their Central Banks
% y-o-y
Source: Círculo de Empresarios based on IMF and Oxford Economics/Haver Analytics, 2024.
Expectations that CBs will loosen monetary policies
* Forecasts
In approximately 80% of the world's economies, average annual headline and core inflation is projected to fall by 2024*
Monetary policy reference interest rate, %
Main causes of inflation▼ (IMF)
• ▼ underlying inflation due to still restrictive monetary policy
• Moderation in labour markets
• Impact of transmission of falls in relative energy prices (past and current) -1
1
3
5
7
9
11
13
Q1
19
Q2
19
Q3
19
Q4
19
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4
23
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Q1
25*
Q2
25*
Q3
25*
Q4
25*
Brazil
China
Eurozone
Japan
UK
US

595.4
202.8
200
260
320
380
440
500
560
620
Oct-23
Oct-23
Oct-23
Oct-23
Oct-23
Nov-23
Nov-23
Nov-23
Nov-23
Dec-23
Dec-23
Dec-23
Dec-23
Jan-24
Estimated Actual
14.3
13.9
11
12
13
14
15
Feb-19
Apr-19
Jun-19
Aug-19
Oct-19
Dec-19
Feb-20
Apr-20
Jun-20
Aug-20
Oct-20
Dec-20
Feb-21
Apr-21
Jun-21
Aug-21
Oct-21
Dec-21
Feb-22
Apr-22
Jun-22
Aug-22
Oct-22
Dec-22
Feb-23
Apr-23
Jun-23
Aug-23
Oct-23
Dec-23
Favourableworldtradeoutlooksubjecttoturbulentenvironment
Source: Círculo de Empresarios based on IMF and Kiel Institute, 2024. 7
Geo-economic fragmentation and increasing trade shocks weigh on the level of world trade (IMF)
World trade to rebound by 2.9 pp in 2024*, while remaining
below the 21st century average of 4.9%
% y-o-y change
* Forecasts
2023 marked by weak trade and lower global container traffic
Estimated world containerised cargo volume per month in million TEUs (Twenty-foot Equivalent Units)
Dec.23: vol. standard containers shipped
= 13.9 M TEU, -2.3% r/ max. Mar. 22
Disruptions in the Red Sea shipping of goods that increase costs
Daily cargo capacity, Red Sea and Suez Canal; Thousands TEU (Twenty-foot Equivalent Units)
-65.9%
The diversion of ships due to attacks in the Red Sea
(transit for 11% of world trade) delays the transport of
goods between Asian production centres and
European consumers by up to 20 days
12.4
0.6
10.9
7.9
9.5
-10.3
12.8
3.2
3.9
2.2
5.6
1.0
-7.8
10.7
5.2
0.4
3.3 3.6
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024*
2025*
Average 2000-19 = 4.9%

Japan: stagnating economy
* Forecasts
Source: Círculo de Empresarios based on Oxford Economics/Haver Analytics, 2024.
9
GDP to decelerate from 2% in 2023* to 0.7% in 2024* on lower aggregate
consumerdemandand less favourable externalmomentum
In 2024* private consumption is projected to decelerate by 2 tenths to 0.7% y-o-y, and public
consumption to fall by 0.2% (vs. +0.9% in 2023). Exports will fall from 2.1% growth in 2023
to 1.3% in 2024*
Japan's economic risk (2.8) is in line with the average for advanced
economies. It reflects the country's high level of GDP per capita and
its relativepolitical stability
Scores from 1 to 10, with 10 = higher risk
GDP % y-o-y change and contribution of components in pp
-5.7
4.1
-4.2
2.6
2.0
0.7 0.6
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023*
2024*
2025*
Private consumption Public consumption
Investment Net exports
GDP
3.0
3.0
3.6
2.6
2.0
0
2
4
6
8
10
Market demand
Market cost
Sovereign credit
Exchange rate
Trade credit
Japan
Advanced economies

0
1.1
0.8
1.8
1.1
2.2
2.7
1.8
1.3
0.1
-0.1-0.3-0.1
0.9
0.6
1.3 1.3
1.7 1.7 1.8
-1
0
1
2
3
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4
23
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Q1
25*
Q2
25*
Q3
25*
Q4
25*
China: the slowdown continues
* Forecasts
GDP growth is forecast by Oxford Economics to reach 4.4% in 2024* and
4.0% in 2025*
% y-o-y
10
In 2024*, inflation will return to positive rates after consecutive falls between
Q3 23 and Q1 24*
% y-o-y
The GDP deflator
averaged -1.4% in the last
three quarters, the most
severe run of falling
inflation since the Asian
financial crisis of 1998
Exposure to major global risks
Tensions over Taiwan are the biggest source of downsideeconomic risk.
They could subtract 1 percentagepoint from annualgrowth over the next
3 years
Average annual impact on GDP growth over the next 3 years (%)
0.3
-0.1
-0.7
-1.0
Excess savings run-down
Middle East escalation
Higher for longer interest rates
Increased China-Taiwan tensions

7.7 7.9 7.3
4.6 4.8
-2.7 -2.1
0.2
3
7.5
1.3 0.7
-1.8 -1.3
1
3.4 3.4 3.7
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4
23
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Q1
25*
Q2
25*
Q3
25*
Q4
25*
* Forecasts
Oxford Economics forecasts 2024* growth below its estimate of potential
growth (2%)
% y-o-y change
11
Private consumption slowdown in 2024*
• ▼ consumer confidence
• moderation in the labour market: ▲
unemployment rate at 2-year high of 3.3%
• phasing out post-pandemic impulses
• high interest rates
• ▼ house prices
• ▲ household debt (> 100% of GDP)
Export growth in 2023 driven by a rebound in semiconductor exports (15.6% of total), which is
not expected to last into 2024*
year-on-year % of export volume
South Korea: modest growth
Slower progress in key
export markets and
prolonged monetary
tightening in advanced
economies may limit
the export rebound
% y-o-y change
Moderate growth in private consumption and investment in 2024*
The return on investment is mainly
conditioned by 2 factors
• Sustainable upturn in the global
semiconductor cycle to guide
electronics manufacturers' investment
plan
• Widespread recovery in manufacturing
beyond semiconductors
-3
-2
-1
0
1
2
3
4
5
6
7
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4
23
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Q1
25*
Q2
25*
Q3
25*
Q4
25*
Investment Private consumption

US: improved expectations
Source: Círculo de Empresarios based on Oxford Economics, 2024.
% y-o-y change
13
The likelihood of recession in the coming months is reduced and
GDP growth is forecast at 2.3% in 2024*
Inflation will reach the Fed's 2% target by the end of 2025*, moderating
faster than expected
% y-o-y change
% y-o-y change
The Fed is expected to start cutting interest rates
* Forecasts
Headwinds
• Impact of delayed
transmission of monetary
policy tightening
• Less accommodative credit
conditions
• Tight fiscal policy
• Moderating labour markets
• Increased policy uncertainty
%
1
2
3
4
5
6
7
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4
23*
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Q1
25*
Q2
25*
Q3
25*
Q4
25*
Headline
Core
(exc. food and energy)
0
1
2
3
4
5
6
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4
23*
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Q1
25*
Q2
25*
Q3
25*
Q4
25*
10-year treasury yield
Federal funds rate
-2.0
-0.6
2.7 2.6
2.2 2.1
4.9
3.3
2.3
1.3
0.8 1.1
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4
23
Q1
24*
Q2
24*
Q3
24*
Q4
24*

13.4
5.5
7.5
4
5
6
7
8
9
10
11
12
13
14
Q4
19
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23*
Q4
23*
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Q1
25*
Q2
25*
Q3
25*
Q4
25*
-0.3 -0.3
-0.4
-0.1
-1
-0,5
0
0,5
1
1,5
Q1
23
Q2
23
Q3
23
Q4
23*
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Inventories Net Exports Government
Investment Consumption GDP
Canada: transition from recession to growth
* Forecasts
14
A slow recovery from the second half of 2024* will leave behind the
decline of four consecutive quarters
% y-o-y change
Inflation will return to the target level by the end of 2024*
% y-o-y change and contribution of components in pp
% labour force
Recession largely due to the
impact of ▲ interest rates
Recovery as BCs start
▼ types
▲ population due to immigration +
slight job losses in recession → ▲
unemployment rate
3.5
2.1 2.1
-2
-1
0
1
2
3
4
5
6
7
8
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23*
Q4
23*
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Q1
25*
Core
Food
Energy
Total

12.1
5.8
4.6
3.6
-2
-1
0
1
2
3
4
5
6
7
8
9
10
11
12
13
Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24*
Feb-24*
Mar-24*
Apr-24*
May-24*
Jun-24*
Jul-24*
Aug-24*
Sep-24*
Oct-24*
Nov-24*
Dec-24*
Food Housing Transportation Others CPI
-1
-0,5
0
0,5
1
1,5
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4
23*
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Q1
25*
Q2
25*
Q3
25*
Q4
25*
Agriculture Industry
Services Taxes
Negative monetary and fiscal policy impulses, weakening commodity prices, private investment constraints and declining agricultural production
Brazil: growth is weakening
* Forecasts
15
Deceleration of growth to 0.4% y-o-y in 2024*
% y-o-y change
GDP % y-o-y change and contribution of sectors in pp
Food prices supported downward inflation trend in 2023
Supply shock in Q1 23
▲ agricultural output
The reduction in inflation will allow the Central Bank of Brazil to reduce the official interest rate,
which is expected to close 2024* at 9%
Commodity price stability forecast 2024*:
• WTI oil ≈70 USD/barrel
• Non-energy commodity index ▼ ≈ 2%
• Real wage growth slowdown
Technical
recession

Source: Círculo de Empresarios based on Investing, 2024.
Weakness in economic activity, mainly in manufacturing
17
Manufacturing PMIs remain in contractionary territory but have improved in recent months
Manufacturing
Jun.22– Jan.24
Services
Jun.22– Jan.24

* Forecasts
Source: Círculo de Empresarios based on European Commission, 2024.
Moderate growth forecast for the EU
18
% y-o-y change
EU GDP stagnates and registers rates well below the world average Inflation will moderate from 9.2% in 2022 to an expected 2.4% in 2025*
mainly due to falling energy prices
% y-o-y change HICP
Growth of major economies ...
% y-o-y change
Inflation in major economies ...
% y-o-y change
3.4
0.6
1.3
1.7
3.4
0.6
1.2
1.6
3.3
3.5
3.2
3.5
2022 2023* 2024* 2025*
EU Eurozone World (exc. EU)
1 0.7
2.9
9.2
6.5
3.5
2.4
1
0.3
2.6
8.4
5.6
3.2
2.2
2015-19 2020 2021 2022 2023* 2024* 2025*
EU Eurozone

105.3
85.6
80
85
90
95
100
105
110
115
120
125
130
135
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Germany Spain France Italy
Source: Círculo de Empresarios based on Eurostat, 2024.
Development of per capita income in the EU27
19
Luxembourg is the EU27 country with the highest income per capita (> 2.6 times
the average), while Bulgaria has just over 60%
Since the peak reached in 2006 and until 2022, Spain has
lost 19.7 points of income per capita compared to the EU
% of total EU27 income per capita total (based on purchasing power standards in millions, current prices) % of total EU27 income per capita total (based on purchasing power
standards in millions, current prices)
Top 10 - 2022
17th

-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024*
2025*
Diff. to potential Potencial Actual
1.6
-6.2
5.9
3.4
0.5 0.6
1.8
-8
-6
-4
-2
0
2
4
6
2019 2020 2021 2022 2023* 2024* 2025*
Private consumption
Investment
Public consumption
Inventories
Net exports
GDP
* Forecasts
Source: Círculo de Empresarios based on Oxford Economics, 2024.
Eurozone: weak growth, below potential
20
Growth forecast lower than the European
Commission's Nov. 23 forecast
Economic activity weak and without clear growth drivers. Stagnation in the last months of 2023 due to the impact of tight monetary policy, the effect of inflation on
consumers' real incomes, weak external demand and recession in industry
GDP grows by only 0.5% y-o-y in 2023* after brief recession in the
2nd semester mainly due to falling activity in Germany
Some
risks
Political risks such as... illiberal regimes in Eastern Europe, immigration-related
tensions in some countries, …
Trade concerns amid subdued global trade developments
Eventual loss of price competitiveness of Eurozone companies due to …
• ▲inflation
• ▲energy costs
• structural and geopolitical changes
"Japanisation of the Eurozone": disappearing factors putting upward
pressure on inflation and ECB forced to ▼ interest rates and keep them low
to boost the economy
% y-o-y change
Growth below potential in 2024*

Better-than-expected inflation performance
% y-o-y change HICP
In Dec.23, inflation rebounded by 5 tenths to 2.9%,
but is expected to fall to 2.8% in Jan.23
21
Overall HICP major Eurozone economies
Estimate Jan.24; % y-o-y change
* Eurostat estimate
** Exc. energy, food, alcohol and tobacco (ECB definition)
€
By type of goods
% y-o-y change
Oxford Economics forecasts inflation below 2% by mid-2024*,
encouraging ECB to lower rates
2.8
3.3
0
1
2
3
4
5
6
7
8
9
10
11
Jan-21
Mar-21
May-21
Jul-21
Sep-21
Nov-21
Jan-22
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
May-23
Jul-23
Sep-23
Nov-23
Jan-24*
Headline
Core**
Jan-23 Jan-24
Aug.23– Dec. 23

Eurozone: unemployment stabilised at lows
Source: Círculo de Empresarios based on Eurostat, 2024. 22
The overall unemployment rate in the Eurozone stood at 6.4% in Dec.23,
with 10.9 million unemployed
Unemployment rate as % of working population in your age group
In Dec. 23, Spain continues to lead in overall unemployment (11.7%)
and unemployment among the under 25s (28.6%)
Unemployment rate % labour force ranked in order of highest to lowest
Top 5 unemployment rate
<25 years
(Eurozone average = 14.4%)
Spain
1
Portugal
2
Greece
3
Slovakia
4
Estonia
5
28.6
23.1
22.3
20.8
20.4
6.4
6.4
14.4
6
8
10
12
14
16
18
20
22
24
26
Jan-07
Aug-07
Mar-08
Oct-08
May-09
Dec-09
Jul-10
Feb-11
Sep-11
Apr-12
Nov-12
Jun-13
Jan-14
Aug-14
Mar-15
Oct-15
May-16
Dec-16
Jul-17
Feb-18
Sep-18
Apr-19
Nov-19
Jun-20
Jan-21
Aug-21
Mar-22
Oct-22
May-23
Dec-23
Total < 25

€ 12.72tr
10
11
12
13
Q4
19
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Public debt at very high levels
23
% GDP
Tr €
% GDP
+25.6%
The debt-to-GDP ratio is reduced by a higher
increase in GDP than in debt in absolute terms
By countries Q3 23
Debt % GDP difference in pp r/ 4Q 19 (pre-pandemic)
Debt % GDP
84.1
99.5
89.9
83
91
99
Q4
19
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23

-5
-4
-3
-2
-1
0
1
2
3
4
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4
23*
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Q1
25*
Q2
25*
Q3
25*
Q4
25*
% quarterly change % y-o-y change
Germany: difficulties in gaining momentum after contraction
* Forecasts
24
Gradual recovery of the economy as tensions on prices, interest
rates or exports ease
% y-o-y change
GDP, % change
Weakness in 2023due to …
• ▼ real income per ▲ inflation → ▼ private consumption
• Normalisation of public spending after the pandemic
• The ▲ interest rate affected investment in construction
• ▼ exports due to weak global demand and structural challenges to industry's
competitiveness
Bleak industrial prospects in 2024*
Industrial Production Index, % change
-0.3
-1
0
1
2
3
4
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4
23
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Q1
25*
Q2
25*
Q3
25*
Q4
25*
% quarterly change
% y-o-y change

142
104.8 103.9 101.4
100
110
120
130
140
150
France Spain Germany Italy
Q2 23 Q4 19
78,4
63,7
58
64
70
76
82
88
Q2
23
Q4
22
Q2
22
Q4
21
Q2
21
Q4
20
Q2
20
Q4
19
Q2
19
Non financial corporations
Households
France: remains stagnant
* Forecasts
Source: Círculo de Empresarios based on Oxford Economics/Haver Analytics, INSEE, Markit, 2024.
25
% y-o-y change
GDP to grow by a modest 0.6% in 2024* after dodging recession in
late 2023
% quarterly change Notable weakness in
private consumption
and investment
Deteriorating outlook in the face of negative activity and confidence
indicators
<50: activity contraction; >50: activity expansion
In addition, consumer
confidence and business
sentiment have declined
by more than 15pp since
Jun.21
Manufacturing and
construction PMIs in
contractionary territory
% GDP
Non-financial sector debt levels are the highest in the Eurozone
France
0.5
0
0.1
0.6
-0.1
0
0.1
0.2 0.2
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4
23*
Q1
24*
Q2
24*
Q3
24*
43.2
45.0
42
47
52
57
Jan-21
Mar-21
May-21
Jul-21
Sep-21
Nov-21
Jan-22
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
May-23
Jul-23
Sep-23
Nov-23
Jan-24
Manufacturing PMI
Services PMI

11.8
1.0
1.8
0
2
4
6
8
10
12
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4
23*
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Q1
25*
Q2
25*
Q3
25*
Q4
25*
Italy: slow gradual recovery
* Forecasts
26
Italian GDP has not recovered to its 2008 pre-crisis level Oxford Economics expects inflation below 2% in 2024*
% y-o-y change
% y-o-y change
Unemployment rate is lowest in more than a decade
Index 2008 = 100
% labour force
Average
2024*
1.6%
In 2024*, growth will be supported mainly by improved real disposable income, strengthening external conditions and spending related to Next Generation EU (NGEU) funds
Modest expected growth in 2024* of 0.6% year-on-year, despite
investment dynamism
▼ inflation mainly due to base effects in
energy components
119.6
121.7
99.3
113.4
86
90
94
98
102
106
110
114
118
122
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023*
2024*
2025*
France Germany Italy Spain
12.7 11.9 11.7 11.2 10.6 10.0 9.2 9.5
8.1 7.7 7.8 8.0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024* 2025*

Household consumption and employment developments better indicators for analysing
the performance of domestic demand
Ireland: economic recovery after a disappointing 2023
* Forecasts
27
% y-o-y change
GDP will grow above the European average, after the fall in 2023 due to
investment and the external sector
GDP, % change
It should be noted, however, that the evolution of GDP does not represent the underlying
dynamics of the national economy because of the enormous influence of multinationals
Growth of around 2% in 2024* and slightly lower in 2025*
% y-o-y change
-6
-2
2
6
10
14
18
22
Q4
19
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4
23*
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Q1
25*
Q2
25*
Q3
25*
Q4
25*
% quarterly change % y-o-y change
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
14
Q1
19
Q2
19
Q3
19
Q4
19
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4
23*
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Q1
25*
Q2
25*
Q3
25*
Q4
25*
Consumer spending Employment

5.7
6.8
2.2
1.3
2.1
2021 2022 2023 2024* 2025*
National demand
External demand
GDP
Portugal: positive growth expectations
* Forecasts
28
% y-o-y change
GDP to decelerate to 1.2% year-on-year in 2024*
Inflation in the vicinity of 2% by the end of 2024* in view of falling energy
prices and a significant base effect on food prices
In 2024*, real disposable incomes and the implementation of the EU's Resilience and Recovery Mechanism are projected to improve to boost growth. But downside risks
dominate, in line with the gloomy global outlook, the potential slowdown in the tourism sector and political instability
0.2
-0.1
10.2
4.8
2.4
2.1 2.2
1.6 1.8 1.8 1.8
-2
-1
0
1
2
3
4
5
6
7
8
9
10
11
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4
23
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Q1
25*
Q2
25*
Q3
25*
Q4
25*
Core
Energy
Food
Headline

11.8 11.6
10
12
14
16
18
Q1
19
Q2
19
Q3
19
Q4
19
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4
23*
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Q1
25*
Q2
25*
Q3
25*
Q4
25*
Eurozone Greece
2023 closes with an average inflation of 3.5% in 2023, compared to
9.6% in 2022. It is forecast at 2.3% in 2024*
Greece: better performance than their European peers since 2022
* Forecasts
29
Lower growth expected in 2024* due to worsening global demand
and tightening monetary and fiscal policies
GDP % y-o-y change and contribution of components in pp % y-o-y change and contribution of components in pp
Thousand €, prices 2015
Structural problems prevail, including low labour productivity, which has
not recovered to pre-pandemic levels
Deflationary energy, while food
prices remain stubbornly high
Strong ▲ NGEU-related public investments → will support growth
% y-o-y change
1.8
-9.0
8.1
5.7
2.1 1.4
2.5
-10
-5
0
5
10
2019 2020 2021 2022 2023* 2024* 2025*
Domestic demand Net exports
Stockbuiling GDP
-3
0
3
6
9
12
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4
23*
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Q1
25*
Q2
25*
Q3
25*
Q4
25*
Core Food
Energy HICP

0
1
2
3
4
5
6
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4
23*
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Q1
25*
Q2
25*
Q3
25*
Q4
25*
Bank Rate
10-year gilt yield
UK: growth increases moderately
* Forecasts
30
Moderate GDP recovery
% y-o-y change
Lower oil and gas prices will bring inflation down
Lower inflation to boost growth
and trigger rate cuts
%
GDP % quarterly change
0.5
0.1
-0.1
0.1
0.3
0
-0.1
0.1
0.2 0.2 0.2
0.3
0.4
0.5 0.5
0.6
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4
23*
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Q1
25*
Q2
25*
Q3
25*
Q4
25*
10.8
6.7
1.6
-4
-2
0
2
4
6
8
10
12
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4
23*
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Q1
25*
Q2
25*
Q3
25*
Q4
25*
Food Petrol
Energy Other
CPI

Growth forecasts
Bank of Spain expects growth to slow to 1.6% in 2024*
GDP growth forecasts Bank of Spain, Dec. 23; % y-o-y change
* Forecasts
Source: Círculo de Empresarios based on Bank of Spain, European Commission, IMF, OECD, M. Economy, Trade and Business and FUNCAS, 2024. 32
Forecasts from other national and international bodies
% y-o-y change
By 2025*, forecasts
range from 1.9% by
the BdE to 2.1% by
the IMF and 2% by
the OECD and the
European
Commission
INE's National
Accounts
preview puts
GDP growth in
2023 at 2.5%
% y-o-y change unless otherwise specified; forecasts Dec. 23
2.4
1.6
1.9
2.3
1.8 2.0
1.3
2.7
2.1
2023* 2024* 2025*
Dec-23
Sep-23
Dec-22

Risks to growth in a context of uncertainty
33
X Geopolitical instability - Developments in military conflicts in Ukraine and the Middle East and tensions in the Red Sea, and their impact on global
supply chains and commodity prices
Economic weakness of major trading partners
X
Persistently high government deficits and debt levels, and the impact of fiscal consolidation measures needed to comply with the new European
fiscal rules
X
Lack of transparency and delays in the implementation of European NGEU funds
X
Uncertainty about the final impact of monetary policy tightening and its implications for investment and consumption decisions
X
Doubts about the withdrawal or extension of government inflation mitigation measures in 2022/23
X
Risk of a further pick-up in inflation. Deterioration of competitiveness due to ▲ prices and possible 2nd round effects via wages or corporate margins
X
Unit labour costs above the Eurozone average since the start of the pandemic. Negative impact on firms' price competitiveness
X
The uncertainty about economic policy is holding back firms' investment and hiring decisions - ▲ costs and rigidities for firms in the face of
new regulatory initiatives such as ▲ minimum wage and social security contributions and possible measures to reform severance pay and
reduce working hours to 37.5 hours a week
X
Growing mismatch between the labour supply and the needs of a market that is increasingly changing and demanding new profiles linked to the
ecological and digital transformations
X
Impact of the lack of legal certainty
X
Impact on capital markets of election results (European Commission, UK, US...)
X

34
2023 ends with GDP growth of 2.5% year on year
In Q4 23 GDP grew by 0.6% quarter-on-quarter and 2% year-on-
year, supported by domestic demand, in particular public
consumption
% change
Source: Círculo de Empresarios based on INE, 2024.
On the supply side, services contributed to almost 80% of the growth in
Q4 23
% y-o-y change
0.3
2.5
0.5 0.5 0.5 0.5 0.4 0.6
6.8 7.2
5.4
3.8 4.1
2.0 1.9 2.0
0
2
4
6
8
Q1 22 Q2 22 Q3 22 Q4 22 Q1 23 Q2 23 Q3 23 Q4 23
Quarterly y-o-y
4.9
3.1 3.0
0.7
1.3
1.9
1.4
2.1
1.9
4.1
2.3
3.1
2.7
0.2
0.6
Q1 22 Q2 22 Q3 22 Q4 22 Q1 23 Q2 23 Q3 23 Q4 23
National demand
External demand
GDP
-1
1
3
5
7
9
Q1 22 Q2 22 Q3 22 Q4 22 Q1 23 Q2 23 Q3 23 Q4 23
Agriculture…
Industry
Construction
Services
GDP
Q1 22- Q4 23

44
49
54
59
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Manufacturing
Services
-4
-2
0
2
4
6
8
Nov-21
Dec-21
Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Stagnant economic activity
Jan. 24 manufacturing PMI stays below 50 but reverses
downward trend
Source: Círculo de Empresarios based on Markit and INE, 2024.
<50: activity contraction; >50: activity expansion
35
Industrial production remains weak
% y-o-y change IPI
Major ▼
Durables
-6,0
Stabilisation in turnover in industry and services
% y-o-y change
Services
Industry
Nov. 21– Nov. 23
Nov. 21– Nov. 23

3.1
3.8
0
1
2
3
4
5
6
7
8
9
10
11
Feb-21
Apr-21
Jun-21
Aug-21
Oct-21
Dec-21
Feb-22
Apr-22
Jun-22
Aug-22
Oct-22
Dec-22
Feb-23
Apr-23
Jun-23
Aug-23
Oct-23
Dec-23
Headline
Core
Falling inflation
Source: Círculo de Empresarios based on INE and Bank of Spain, 2024.
Downward trend in inflation
% y-o-y change
Food prices down, but still high
CPI Dec 23; Top 5 largest increases by type of goods; % y-o-y change
* Forecasts
36
Downward trend mainly due to expected
energy price developments
Harmonised CPI projections (Bank of Spain)
Core inflation falls by 7
tenths of a percentage
point to ...
Annual inflation 2023 → 3.5%
% y-o-y change
% y-o-y change
By regions, Dec. 23
National average
3.1%
3.4 3.3
2
4.1
1.9 1.9
2023* 2024* 2025*
Headline Core

109.8
115.3
108.8
94
96
98
100
102
104
106
108
110
112
114
116
Q2
18
Q3
18
Q4
18
Q1
19
Q2
19
Q3
19
Q4
19
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4
23
Total employed
Public
Private
More public employment and loss of productivity
The unemployment rate stood at 11.8% in Q4 23, but does not
include inactive permanent discontinuous workers
Q2 18 =100
37
Since Q2 18, public employment increased by 15.3%, 6.5 pp more than
the increase in the private sector
Since Q2 18: ▲ employed = 1.9 M to 21.1 M (+9.8%)
• +475,500 in the public sector up to 3.59 M (+15.3%)
• +1.4 M in the private sector to 17.7 M (+8.8%)
% labour force
Employment growth higher than GDP growth leads to
productivity losses
Q4 23
▲ Non salaried = +3.9% y-o-y
▲ Salaried = +3.8% y-o-y
o Temporary → +5.4%
o Permanent → +5.6%
• Permanent-discontinuous → +9.6%
Q4 23
▲ employed by sectors (% y-o-y change)
o Agriculture and livestock → +2.3%
o Industry → +1.0%
o Construction → +8.3%
o Services → +4.0%
* Productivity per full-time equivalent job
% y-o-y change
16,3
Q2
18
Q3
18
Q4
18
Q1
19
Q2
19
Q3
19
Q4
19
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4
23
10
11
12
13
14
15
16
17
1.8
2.9
3.5 3.8
4.1
2.0 1.9 2.0
1.5
-1.2 -1.4
-1.8
Q1 23 Q2 23 Q3 23 Q4 23
Employed GDP Productivity*

60,404
0
20000
40000
60000
80000
100000
120000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
In Jan. 24, the no. of registered unemployed increased by 60,404 persons
compared to Dec. 23 despite not including inactive permanent unemployed*
Loss of dynamism in job creation
Source: Círculo de Empresarios based on Mº Inclusion, Social Security and Migration and Mº Labour and Social Economy, 2024.
In Jan. 24, average Soc. Sec. enrolment lost 231,250 persons r/Dec. 23
in the original series (+38,357 in the seasonally adjusted series)
Absolute monthly change in average Social Security enrolment in January Absolute monthly change in number of unemployed January. Original series
Total average number of
members Jan.24
20,604,761
Original series
20,881,293
Seasonally adjusted series
+523,537
average affiliates
r/Jan.23
+544,524
Seasonally adjusted series
Absolute year-on-year change
Total unemployed Aug.23
2,767,860
38
60% women
+58,721
In servces sector
* In SEPE statistics, in the category "job seekers not unemployed with an employment
relationship*, permanent discontinuous workers are included together with workers with
ERE, subsidised temporary agricultural workers, Social Security affiliates in the general
regime or self-employed, and benefit recipients assigned to social collaboration work. In
Jan. 24 there were 778,346 people, 490,573more than in Mar. 22, the date on which the
new regulation of discontinuous permanent contracts came into force
-244044
-231250
38357
-260000
-220000
-180000
-140000
-100000
-60000
-20000
20000
60000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Original series Seasonally adjusted series

Continued increase in public debt. Social Security debt doubled
since January 2020 (from €50 bn to €116.2 bn)
Persistent imbalances in public accounts
Debt PPAA Nov. 23 → € 1,575 bn (+4.6% y-o-y)
The consolidated public deficit* of Central Govt, Autonomous Regions
and Social Security, in National Accounts terms, up to November is
reduced from 2.14% in 2022 to 1.89% in 2023
*Does not include the balance of Local Corporations (LLCC)
Source: Círculo de Empresarios based on IGAE and Bank of Spain, 2024.
Up to Nov.23; million € and %
39
**AAOO: Autonomous Organisations; LLCC: Local Corporations
By level of Administration
Regions balance
Regions with superavit
Regions with deficit
For 2023as a
whole, the Bank of
Spain forecasts a
deficit for total
general government
of 3.8% (inc. Local
Corporations)
0
2
4
6
8
10
12
1.200
1.250
1.300
1.350
1.400
1.450
1.500
1.550
1.600
Mar-20
Jul-20
Nov-20
Mar-21
Jul-21
Nov-21
Mar-22
Jul-22
Nov-22
Mar-23
Jul-23
Nov-23
Bn €
% y-o-y change (right axis)

-6.8% y-o-y
Exports
-0.7% y-o-y
Jan.-Nov. 23
Slowdown in foreign trade
Source: Círculo de Empresarios based on M. Industry and Tourism, 2024.
€ 354,7407 M
Imports
Balance
€ -37,158.3 M
€ 391,899.0 M
Energy € -30,746.2 M
In Jan-Nov. 23 the trade deficit decreased by 41.6% vs. Jan-Nov. 22
Non Energy € -6,412.0 M
Million €; Jan.-Nov. of each year
Top 3 exports by sector
Food, beverage
and tobacco
▲4.7%
17.3%
Chemical prod.
▼9.3%
17.0%
Capital goods
▲ 12.1%
19.5%
Weight in % of total and % y-o-y change
-36.2%
y-o-y
-58.3%
y-o-y
Asia
0.7 % 1.9 %
Exports by destination
62.7%
EU-27
54.6%
Eurozone
10.8%
America
% y-o-y change
4.1 %
% of total
7.6%
8.1 %
40
200000
250000
300000
350000
400000
450000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Deficit
Exports
Imports

85,1
83,5
2
14
26
38
50
62
74
86
Jan.
Feb.
Mar.
Apr.
May
Jun.
Jul.
Aug.
Sep.
Oct.
Nov.
Dec.
2023 - new record
2019
In package
tour
16.7%
Not included
in package
tour
83.3%
International tourist arrivals
Jan.- Dec. 23
Tourism excedes pre-pandemic levels
85,056,528 tourists
Tourism expenditure
Jan.- Dec. 23 € 108,662.5 M
1,278 € per tourist +5.1% y-o-y
Millions of cumulative tourists
Bn €
Dec. 23 5,207,339 +26.2% y-o-y
y-o-y
+18.7%
+1.9% r/ Jan.-Dec. 19
By country of origin of tourists
% of cumulative total Dec. 23
By means of access, 81.7% of international tourists enter Spain via airports. 15.8% by road,
2.1% by ports and the remaining 0.4% by rail
2/3 of international tourists stay in hotels
Dec. 23 € 7,093.2 M +35.4% y-o-y
y-o-y
+24.7%
+18,2% r / Jan.-Dec. 19
Catalonia is the Autonomous Community that receives the most tourists, 21.2% of the total,
followed by the Balearic Islands (16.9%) and the Canary Islands (16.4%)
175 € per tourist and day +8.0% y-o-y
Distribution by item of expenditure
% of total cumulative expenditure
Dec. 23
41
0
10
20
30
40
50
60
70
80
90
100
110
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.
2023
2019
2020
2021
2022

MARKETS

Stock markets: volatility persists
Recovery of the World Stock Index (MSCI World)
Stock market gains in advanced economy markets
January 2021 = 100
Price US$
43
1.800
2.000
2.200
2.400
2.600
2.800
3.000
3.200
3.400
Feb-20
Apr-20
Jun-20
Aug-20
Oct-20
Dec-20
Feb-21
Apr-21
Jun-21
Aug-21
Oct-21
Dec-21
Feb-22
Apr-22
Jun-22
Aug-22
Oct-22
Dec-22
Feb-23
Apr-23
Jun-23
Aug-23
Oct-23
Dec-23
Feb-24
90
95
100
105
110
115
120
125
130
135
Jan-21
Feb-21
Mar-21
Apr-21
May-21
Jun-21
Jul-21
Aug-21
Sep-21
Oct-21
Nov-21
Dec-21
Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Feb-24
Ibex-35 S&P 500 Euro Stoxx 50

92,2
156,8
50
70
90
110
130
150
170
190
210
230
250
Jan-21
Mar-21
May-21
Jul-21
Sep-21
Nov-21
Jan-22
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
May-23
Jul-23
Sep-23
Nov-23
Jan-24
Spain Italy
Spain's risk premium is stable at around 90 points, 64.6 points
below the Italian risk premium
Widespread increases in 10-year bond yields, resulting in a rising
cost of capital
%
44
Fixed income: yield increases
Basic points
-1
0
1
2
3
4
5
Jan-21
Mar-21
May-21
Jul-21
Sep-21
Nov-21
Jan-22
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
May-23
Jul-23
Sep-23
Nov-23
Jan-24
Spain Germany UK US

Exchange rates - €/$ parity
Euro remains weak against the dollar
Source: Círculo de Empresarios based on Oxford Economics, 2024
Quarterly exchange rate €/$
45
1
1,2
1,4
1,6
1,8
2
Q1
05
Q4
05
Q3
06
Q2
07
Q1
08
Q4
08
Q3
09
Q2
10
Q1
11
Q4
11
Q3
12
Q2
13
Q1
14
Q4
14
Q3
15
Q2
16
Q1
17
Q4
17
Q3
18
Q2
19
Q1
20
Q4
20
Q3
21
Q2
22
Q1
23
Q4
23
US$ per Pound
70
80
90
100
110
120
130
140
150
Q1
05
Q4
05
Q3
06
Q2
07
Q1
08
Q4
08
Q3
09
Q2
10
Q1
11
Q4
11
Q3
12
Q2
13
Q1
14
Q4
14
Q3
15
Q2
16
Q1
17
Q4
17
Q3
18
Q2
19
Q1
20
Q4
20
Q3
21
Q2
22
Q1
23
Q4
23
Yen per US$
0,9
1
1,1
1,2
1,3
1,4
1,5
1,6
Q1
05
Q4
05
Q3
06
Q2
07
Q1
08
Q4
08
Q3
09
Q2
10
Q1
11
Q4
11
Q3
12
Q2
13
Q1
14
Q4
14
Q3
15
Q2
16
Q1
17
Q4
17
Q3
18
Q2
19
Q1
20
Q4
20
Q3
21
Q2
22
Q1
23
Q4
23
US$ per Euro

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Economy in the shadow of geopolitics-Quarterly-Report-February-2024-Circulo-de-Empresarios

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