5Spain has tripled its weight in EU15 Share of Nominal GDP 1960Share of Nominal GDP 201065,4%12,2%18,7%Spain3,7%FranceItalyRest of EU1559,2%13,9%17,5%Spain9,4%FranceItalyRest of EU15Source: European Comission and CEC
6Population has grown over 50% in the last 50 years Variations in Population in the Last 50 YearsIn 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.Source: Eurostat
7excl. building industry In the last years we have won international respect… even excluding the building industryGDP(Based on Euroconstants; 1993=100)100120140160199319951997199920012003200520072009European Core*SPAINSince 1994, Spain’s 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).SPAINexcl. building industry7*European core countries: France, Germany, Italy, Austria and The NetherlandsSource: IMF forecasts
8Fourth largest GDP per capita among the foremost EU15 countries Source: Eurostat
10Attractive country to Institutional Investment thanks to high profitability for the shareholderTotal Shareholder Return%Before the crisis, profitability was 3 times higher than the rest of European countries.During the crisis, it was twice as high.Source: Wharton Business School
11Spanish companies account for 12.1% of the European EuroStoxx 300 indexEuroStoxx 300 (Securities Exchange Index for the Euro Area):share by listed company nationalityFactors: Spain’s main markets include 1,100 million people (Europe and Latin America) and the country has high productivity levels compared to its competitors.Source: Factset
12Labour Productivity by Company Size Nr. of workers1 to 910 to 1920 to 4950 to 249> 250Spain Germany UKbase 100 = average productivity of firms in USASource: OECD Compendium of Productivity. Formulated by CEC
13Invariant share of world export market The exporting rate is still very high and in the last term it has increased 23% since 2010.Source: CEC based on WTO data.
15It has leading companies in key industries: sucessful diversification into non-tourist servicesOther servicesTo businessTourismSpanish Service Exports by Industry(% total, 2000)Other servicesTo businessTourismSpanish Service Exports by Industry(% total, 2010)Non-tourist services world exports grew by 40% in the last decade(yearly expansion average was 7%).
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 world’s most highly developed countries
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 Europe’s 5th highest turnover and very high investment in R&D.
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 systemsSpain is a world leader and a European benchmark in mobile telephone and broadband coverage9.1% 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 betweenOne of the 5 largest telecommunications companies is Spanish.
19Maintaining its leadership in TOURISM, Tourist Industry Revenues in 2009(billion euros)Tourist Industry Contribution to GDP(% in 2006)5 firms are among the 30 most important hotel companies in the worldSource: AFI, World Tourism Organisation and Tourism in OECD countries 2008.
21Private sector deleveraging, banking sector consolidation, and labour market flexibility Adjustments underway: after 2nd year, a surplus (or financing capacity) of over 4% of GDP was recorded.Foreign indebtednessby the private sector
22Investment Rate (% GDP) Broken Down by Components (Mean )HousingNon-housingSpain Germany France Italy UKSource: National Treasuries
23... also with one of the best infrastructure networks and its position as strategic enclave Km of Motorway per Million InhabitantsSource: Eurostat, Adif (Spanish railway and infrastruture agency), McKinsey andCEC.
24Adjustment in housing investment is complete, having reached pre-boom levelsHousing investment(% GDP)9.0%7.5%6.0%4.5%3.0%mar-jun-sep-dec-mar-jun-sep-dec-mar-jun-sep-dec-mar-95969798000102030506070810Source: WTO formulated by CEC.24
25Adjustment in housing Unsold Housing Stock (thousand units) Source: Ministry of Internal Development and CEC.
26Labour market flexibility Private sector deleveraging, banking sector consolidation, and labour market flexibilityAdjustments underway: after 2nd year, a surplus (or financing capacity) of over 4% of GDP was recorded.Foreign indebtednessby the private sectorReform on September and current collective bargaining.Labour market flexibility
27Compared adjustment of cycle and unemployment between Spain and the average of France and Germany
28Active employment rate yearly variation % Unemployment rateworkforce %Source: CEC baded on INE data and own projections.
29Labour market flexibility Private sector deleveraging, banking sector consolidation, and labour market flexibilityAdjustments underway: after 2nd year, a surplus (or financing capacity) of over 4% of GDP was recorded.Foreign indebtednessby the private sectorReform on September and current collective bargaining.Labour market flexibilityRestructuring, recapitalisation and a change in savings bank governance underway.Banks solvency
30reduction of the excess of installed capacity Adjustment plan:reduction of the excess of installed capacitySpain: Operational Branches(Mar-1990=100)Financing system: mortagesapproved per office and year(units)BanksSavings banksSource: Bank of Spain and INE, sep 2010Source: Bank of Spain and INE, july 201130
31Core capital in financial institutions Adjustment plan: advanced process of losses and capitalization recognitionCore capital in financial institutions%APRProvisions of the financial institutions constituted since 2008% GDPCore capitalBasic core capitalSource: Bank of Spain, july 2011Source: Bank of Spain, may 201131
32Pension system sustainability Public finance sustainability Reforms with an impact in the short term: pension system and public finance solvencyMarket concernsReformPension system sustainabilityDirected toward reducing mid- term pension spending (-2/4 pp GDP)Public finance sustainabilityAmbitious fiscal consolidation plan underway: towards 3% budgetary deficit by 2013.…although there is a higher risk for autonomous communities.
33Budget balance and public debt (% GDP)Public Debt(% GDP)StructuralTotalEuro AreaGermanySpainSource: European ComissionSource: Ministry of Economy, july 2011
34Diversification of maturity dates on sovereign debt: long mean termTreasure Debt Average Maturity(years)Source: AFI, AMECO and Bloomerg
36…with a big impact on growth on the long term Spain-Euro Area Differential – YoY Growth RatesAfter structural reforms on track, back to positive growth differentials whith Euro Zone.Main reforms on track:Fiscal consolidation:Target: public deficit of 3% GDP in 2013 (from 11% GDP in 2011).More than 60% of the adjustment to be delivered before 2012.Financial sectorRestructuring process of saving banks (from 45 to 17 entities in a 6 month process)Reinforcement of the financial system (feb 2011): (i) increasing the capital requirements of Spanish institutions(8-10%); ii) encourage them to raise private capital; (iii) Timetable: 30th September is the deadline for its implementation.Public financial support from FROB available.Labour market: a set of measures towards…Fostering permanent and training contractsClarifying grounds for objective dismissals.Greater internal flexibility at firm level: workers and firms able to opt-out from conditions imposed by collective bargaining agreementPension systemGradual increase in the statutory retirement age from 65 to 67Additional restrictions to early retirementReinforcement the relation between contributions and benefits ( example: the number of years of career used to compute the pension is enlarged from 15 to 25)Collective bargaining (in negotiation process)Product market regulation, main reforms:Shorter business creation period to between 1 and 5 days, from an average of 33 (approved)Transposition of Services Directive on permits and licenses, and removal of local licenses (approved)Professional services: Liberalizing access, fostering competition and mobility (to be approved in spring 2011).Industrial, R&D and energy policy. Forthcoming policy measures, after the broad agreement between Government and trade unions (february 2011) to:Reinforce the relative weight of industrial activity in the Spanish economy.Overcome the Spanish economy’s dependence on carbon and reach a sustainable mix of energy sources.Underline the importance of R+D+I to consolidate a sustainable growth pattern.Datos del gráfico:Pre-crisis años : (a) crecimiento España: 3%; (b) Crecimiento Zona Euro: 2%Crisis años : (a) crec. España: -1,9%; (b) Crec. Zona Euro: -1,2%Reformas años : (a) crec. España: 1,22%; (b) Crec. Zona Euro: 1,69%Medium and long term Promedio ponderado de:años : (a) crec. España:1,82 %; (b) Crec. Zona Euro: 1,80%(PIB potencial de la OCDE): (a) crec. España: 2,3%; (b) Crec. Zona Euro: 1,7%Source: FMI & OECD
37The challenge is to increase the growth potential The Spanish economy is undergoing a change in its growth patterns; facing the new era: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.In order to culminate the process, the reforms must conclude successfully and the adjusments plans underway must be followed rigorously.
38Strengths and forecasts Spain’s Equity StoryStrengths and forecastsof the Spanish economyMadrid, July 2011