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Quarterly report on the global and the Spanish economy Q1 2016

The quarterly report provides the following key points: 1) Global economic growth is projected to slow to 3.2% in 2016 due to challenges in China, commodity exporting nations, and political issues in Europe. 2) The US economy saw moderate growth of 1.4% in Q4 2015 driven by private consumption and investment, while recession risks rose to 25%. 3) Eurozone recovery was supported by domestic demand but inflation remained low and unemployment high in some countries like Italy and Spain.

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Quarterly report on the global and the Spanish economy Q1 2016 Círculo de Empresarios Madrid, April 2016
2 ENTORNO GLOBAL
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
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
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
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
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
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
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
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
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)
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
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
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
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
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)
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
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
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
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
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
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
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
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
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)
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)
27 ENTORNO GLOBAL
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
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
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
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
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
-9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Aug-12 Jan-13 Jun-13 Nov-13 Apr-14 Sep-14 Feb-15 Jul-15 Dec-15 Creditto non-financial corporations Interannual change Source:Bank of Spain, 2016 33 Credit to households and corporations 2015 Access to credit improves for households and non-financial corporations, but it is still below the end of 2010 levels -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Aug-12 Jan-13 Jun-13 Nov-13 Apr-14 Sep-14 Feb-15 Jul-15 Dec-15 Creditto households Interannual change Other loans Total Housing loans Source:Bank of Spain, 2016 %, annual change %, annual change
34 Labour market March 2016:  ▼ Unemployed= 58,216 vs. February  ▲ Affiliates = 138,086 vs. February  ▲ Registered contracts = 1,508,881 • 10% permanent • 90% temporary  Total dependent employment: • 75% permanent • 25% temporary Unemployment rate in Spain, February 2016= 20.4% of working population vs. eurozone average = 10.3% (Eurostat). 16,393,866 17,305,798 4,763,680 4,094,770 0 1.000.000 2.000.000 3.000.000 4.000.000 5.000.000 6.000.000 16.000.000 16.500.000 17.000.000 17.500.000 18.000.000 18.500.000 19.000.000 19.500.000 20.000.000 2007 2008 2009 2010 2011 2012 2013 2014 2015 Jan.16 Feb.16 Mar.16 Affiliates Evolutionof affiliationtoSocial Security and registered unemployment Persons Affiliates Unempployed Unemployed Source:Círculo de Empresarios basedon Ministryof Employment and Social Security, March 2016
1,1 1,00,90,9 -0,8 -0,8 -0,3 0,0 -0,3 -0,7 -0,9 -0,4 0,10,1 -0,2 -0,6 -0,7 -1,1 -1,3 -1,0 -0,4 -0,1 -0,2 -0,5 -0,3 0,1 0,2 0,4 -0,1 0,0 0,2 -1,5 -1 -0,5 0 0,5 1 1,5 CPI %, interannual change Core inflation General Source:INE, 2016 35 Prices 1Q 2016 → CPI has ventured further into negative territory and core inflation has kept its positive trend
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
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
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
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
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
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
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
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Quarterly report on the global and the Spanish economy Q1 2016

  • 1.
    Quarterly report on theglobal and the Spanish economy Q1 2016 Círculo de Empresarios Madrid, April 2016
  • 2.
  • 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’seconomic 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 Growthis 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 During2015, 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 globaleconomic 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 leadsglobal 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 toa 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 reservesand 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 toresist 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: growthheterogeneity * 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 Brazilhas 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 growthand 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 monetarypolicy 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 inEurope 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 Economicrecovery 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: monetarypolicy 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-15oil 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 USproduction 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 commodityprices 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 Higherlikelihood 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 depreciationof 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)
  • 27.
  • 28.
    Boosts to growth 28 1 2 3 4 5 Oilprices 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 January2016: 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: compositionof 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 domesticand 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
  • 33.
    -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Aug-12 Jan-13 Jun-13 Nov-13 Apr-14 Sep-14 Feb-15 Jul-15 Dec-15 Creditto non-financial corporations Interannual change Source:Bankof Spain, 2016 33 Credit to households and corporations 2015 Access to credit improves for households and non-financial corporations, but it is still below the end of 2010 levels -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Aug-12 Jan-13 Jun-13 Nov-13 Apr-14 Sep-14 Feb-15 Jul-15 Dec-15 Creditto households Interannual change Other loans Total Housing loans Source:Bank of Spain, 2016 %, annual change %, annual change
  • 34.
    34 Labour market March 2016: ▼ Unemployed= 58,216 vs. February  ▲ Affiliates = 138,086 vs. February  ▲ Registered contracts = 1,508,881 • 10% permanent • 90% temporary  Total dependent employment: • 75% permanent • 25% temporary Unemployment rate in Spain, February 2016= 20.4% of working population vs. eurozone average = 10.3% (Eurostat). 16,393,866 17,305,798 4,763,680 4,094,770 0 1.000.000 2.000.000 3.000.000 4.000.000 5.000.000 6.000.000 16.000.000 16.500.000 17.000.000 17.500.000 18.000.000 18.500.000 19.000.000 19.500.000 20.000.000 2007 2008 2009 2010 2011 2012 2013 2014 2015 Jan.16 Feb.16 Mar.16 Affiliates Evolutionof affiliationtoSocial Security and registered unemployment Persons Affiliates Unempployed Unemployed Source:Círculo de Empresarios basedon Ministryof Employment and Social Security, March 2016
  • 35.
    1,1 1,00,90,9 -0,8 -0,8 -0,3 0,0 -0,3 -0,7 -0,9 -0,4 0,10,1 -0,2 -0,6 -0,7 -1,1 -1,3 -1,0 -0,4 -0,1 -0,2 -0,5 -0,3 0,1 0,2 0,4 -0,1 0,0 0,2 -1,5 -1 -0,5 0 0,5 1 1,5 CPI %, interannual changeCore inflation General Source:INE, 2016 35 Prices 1Q 2016 → CPI has ventured further into negative territory and core inflation has kept its positive trend
  • 36.
    Incompliance of thedeficit 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 publicdebt 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 regionaladministrations 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: Círculode 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 (annualchange) ▲ 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 ininternational 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
  • 43.