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1 Spains Equity Story Strengths and forecasts of the Spanish economy Madrid, July 2011.

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Presentation on theme: "1 Spains Equity Story Strengths and forecasts of the Spanish economy Madrid, July 2011."— Presentation transcript:

1 1 Spains Equity Story Strengths and forecasts of the Spanish economy Madrid, July 2011

2 2 Situation

3 3 Spains GDP Year-on-year variation rate (%) (p) Projection Source: CEC based on INE Annual variation % (p)0.8 Year-on-year variation % (p)0.8

4 4 Spain, well positioned to face the new era

5 5 65,4% 12,2% 18,7% Spain 3,7% France Italy Rest of EU15 59,2% 13,9% 17,5% Spain 9,4% France Italy Rest of EU15 Share of Nominal GDP 1960 Share of Nominal GDP 2010 Source: European Comission and CEC Spain has tripled its weight in EU15

6 6 Variations in Population in the Last 50 Years Source: Eurostat Population has grown over 50% in the last 50 years In the last 10 years, the labour force has increased 27%, 5 times higher than the European average. Since 1994 Spain represents 1/3 of the total growth on labour force in the EU.

7 77 In the last years we have won international respect… even excluding the building industry *European core countries: France, Germany, Italy, Austria and The Netherlands Source: IMF forecasts GDP (Based on Euroconstants; 1993=100) European Core* SPAIN Since 1994, Spains GDP has increased over 60%, 2.3 times higher than in European core countries… … this sets Spain as 4th economy regarding per capita income and 5th in size… … with the highest investment rate excl. housing (infrastructure & capital goods). SPAIN excl. building industry

8 8 Source: Eurostat % GDP per Capita 2010 Fourth largest GDP per capita among the foremost EU15 countries

9 9 Spains Strenghts

10 10 Attractive country to Institutional Investment thanks to high profitability for the shareholder Source: Wharton Business School Total Shareholder Return % Before the crisis, profitability was 3 times higher than the rest of European countries. During the crisis, it was twice as high.

11 11 EuroStoxx 300 (Securities Exchange Index for the Euro Area): share by listed company nationality Source: Factset Spanish companies account for 12.1% of the European EuroStoxx 300 index Factors: Spains main markets include 1,100 million people (Europe and Latin America) and the country has high productivity levels compared to its competitors.

12 12 Source: OECD Compendium of Productivity. Formulated by CEC Labour Productivity by Company Size base 100 = average productivity of firms in USA Spain Germany UK 1 to 9 10 to to to 249 > 250 Nr. of workers

13 13 Source: CEC based on WTO data. Invariant share of world export market Share of World Export Market The exporting rate is still very high and in the last term it has increased 23% since 2010.

14 14 Spanish companies leadership

15 15 Non-tourist services world exports grew by 40 % in the last decade (yearly expansion average was 7 %). Other services To business Tourism Spanish Service Exports by Industry (% total, 2000) Other services To business Tourism Spanish Service Exports by Industry (% total, 2010) It has leading companies in key industries: sucessful diversification into non-tourist services

16 16 … advancing in high added value sectors, such as in SERVICES… Distribution and apparel: the world ready-to-wear leader company is Spanish, and three Spanish firms are among the top 50 retailers world- wide. Biotechnology: 3rd place world-wide in agrobiotechnology, and 5th place world-wide in biochemistry and molecular biology. Hotel and restaurant trade: with the recent trend toward innovation in restaurant services, Spain has taken 5th place in the number of Michelin stars. Finance and insurance: 4 Spanish financial institutions are among the 50 most reliable in the world, and 2 Spanish insurers rank among the largest in the world. E-Health, e-government: significant advances place Spain 9th on the list of the worlds most highly developed countries

17 17 … or in CONSTRUCTION, ENERGY and MANUFACTURING industries… Infrastructure: 7 Spanish companies manage and/or build nearly 40% of the major transport franchises in the world, mainly airports, ports and motorways. Renewable energies: 2 of the 10 major companies are Spanish. Environment, water treatment and desalination: Spain produces more desalinated water than any other country in the world. Automobile and automobile components industry: Spain is the number one manufacturer of automobile cladding world-wide and the eighth largest vehicle manufacturer world-wide. Aerospace: Spain has Europes 5th highest turnover and very high investment in R&D.

18 18 … and also on the new information and communication technologies (ICT) 3 of every 5 flights world-wide would be controlled using Spanish air navigation systems Spain is a world leader and a European benchmark in mobile telephone and broadband coverage 9.1% ICT market growth in Spain in the last 5 years. Investment in innovation (R&D+I) in ICT has almost doubled (x1.9) in the period between One of the 5 largest telecommunications companies is Spanish.

19 19 Source: AFI, World Tourism Organisation and Tourism in OECD countries Maintaining its leadership in TOURISM, 5 firms are among the 30 most important hotel companies in the world Tourist Industry Revenues in 2009 (billion euros) Tourist Industry Contribution to GDP (% in 2006)

20 20 Imbalances under correction

21 21 Foreign indebtedness by the private sector Adjustments underway: after 2nd year, a surplus (or financing capacity) of over 4% of GDP was recorded. Private sector deleveraging, banking sector consolidation, and labour market flexibility

22 22 Source: National Treasuries SpainGermany France Italy UK Investment Rate (% GDP) Broken Down by Components (Mean ) Housing Non-housing

23 23... also with one of the best infrastructure networks and its position as strategic enclave Km of Motorway per Million Inhabitants Source: Eurostat, Adif (Spanish railway and infrastruture agency), McKinsey andCEC.

24 24 Adjustment in housing investment is complete, having reached pre-boom levels Housing investment (% GDP) 3.0% 4.5% 6.0% 7.5% 9.0% mar- 95 jun- 96 sep- 97 dec- 98 mar- 00 jun- 01 sep- 02 dec- 03 mar- 05 jun- 06 sep- 07 dec- 08 mar- 10 Source: WTO formulated by CEC.

25 25 Adjustment in housing Unsold Housing Stock (thousand units) Source: Ministry of Internal Development and CEC.

26 26 Foreign indebtedness by the private sector Adjustments underway: after 2nd year, a surplus (or financing capacity) of over 4% of GDP was recorded. Labour market flexibility Reform on September 2010 and current collective bargaining. Private sector deleveraging, banking sector consolidation, and labour market flexibility

27 27 Compared adjustment of cycle and unemployment between Spain and the average of France and Germany

28 28 Active employment rate yearly variation % Unemployment rate workforce % Source: CEC baded on INE data and own projections. Employment

29 29 Foreign indebtedness by the private sector Adjustments underway: after 2nd year, a surplus (or financing capacity) of over 4% of GDP was recorded. Labour market flexibility Reform on September 2010 and current collective bargaining. Banks solvency Restructuring, recapitalisation and a change in savings bank governance underway. Private sector deleveraging, banking sector consolidation, and labour market flexibility

30 30 Adjustment plan: reduction of the excess of installed capacity Financing system: mortages approved per office and year (units) Source: Bank of Spain and INE, july 2011 Source: Bank of Spain and INE, sep 2010 Banks Savings banks Spain: Operational Branches (Mar-1990=100)

31 31 Adjustment plan: advanced process of losses and capitalization recognition Source: Bank of Spain, july 2011 Source: Bank of Spain, may 2011 Provisions of the financial institutions constituted since 2008 % GDP Core capital in financial institutions %APR Core capital Basic core capital

32 32 Pension system sustainability Directed toward reducing mid- term pension spending (-2/4 pp GDP) Public finance sustainability Ambitious fiscal consolidation plan underway: towards 3% budgetary deficit by …although there is a higher risk for autonomous communities. Reforms with an impact in the short term: pension system and public finance solvency Market concernsReform

33 33 Budget balance and public debt Budget Balance (% GDP) Public Debt (% GDP) Source: Ministry of Economy, july 2011 Source: European Comission Structural Total Euro Area Germany Spain

34 34 Source: AFI, AMECO and Bloomerg Diversification of maturity dates on sovereign debt: long mean term Treasure Debt Average Maturity (years)

35 35 Conclusion

36 36 Source: FMI & OECD …with a big impact on growth on the long term Spain-Euro Area Differential – YoY Growth Rates

37 37 The challenge is to increase the growth potential Spain has good international position and reputation, especially its large-scale companies, leading in key sectors and more productive than their European equals. It has a high potential talent (it is placed 11th in the world ranking according to Mapping Global Talent) The imbalances accumulated in the past are undergoing an advanced adjustment. The reforms underway are directed at enhancing the growth potential in the mid-long term. The Spanish economy is undergoing a change in its growth patterns; facing the new era: In order to culminate the process, the reforms must conclude successfully and the adjusments plans underway must be followed rigorously.

38 38 Spains Equity Story Strengths and forecasts of the Spanish economy Madrid, July 2011


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