Spanish economic outlook
June 2017
1
2
3
Spanish economy a pleasant surprise
Growth drivers
Forecasts once again bright
Spanish economic outlook | June 2017
One of the most dynamic economies in Europe
Spain growing at a faster rate than EMU over last three years
3
0.8%
Spanish economic outlook | June 2017
Job creation rates on the up...
Number of Social Security registered members returns to 2009 levels
4
3.8%
2.3%
Spanish economic outlook | June 2017
... while high unemployment rate falls
Decrease in active population also a factor
5
-2.2 pp
Spanish economic outlook | June 2017
Household consumption remains buoyant
Greater consumer confidence following political uncertainty in 2016
6
Spanish economic outlook | June 2017
Housing market recovery gaining strength
Rising demand driving up new house building
7
+15%
1Q 17
+19%
1Q 17
Spanish economic outlook | June 2017
Sharp rise in lending to households
8
Source: Bank of Spain and Bankia Research
0
5
10
15
20
25
30
35
40
45
Jan
-16
Feb
-16
Mar
-16
Ap
r-1
6
May
-16
Jun
-16
Jul-
16
Aug
-16
Sep-
16
Oct
-16
Nov
-16
Dec
-16
Jan
-17
Feb
-17
Mar
-17
y/y
rate
of
chan
ge %
Credit card Loans
New consumer loans
-20
-10
0
10
20
30
40
50
Jan
-16
Feb
-16
Mar
-16
Ap
r-1
6
May
-16
Jun
-16
Jul-
16
Aug
-16
Sep-
16
Oct
-16
Nov
-16
Dec
-16
Jan
-17
Feb
-17
Mar
-17
y/y
rate
of
chan
ge %
New loans to house purchase
27.2%
29.8%
20.6%
39.9
35.0
63.6
0
20
40
60
80
100
120
Dec
-07
Dec
-08
Dec
-09
Dec
-10
Dec
-11
Dec
-12
Dec
-13
Dec
-14
Dec
-15
Dec
-16
New loans to households(2007 = 100)
Total
Housing
Consumption
Spanish economic outlook | June 2017
Notable uptick in business turnover
Growth rates accelerating since mid-2016
9
Spanish economic outlook | June 2017
Signs of a rise in business spending also evident
Decisions pushed back in 2016 now starting to be acted upon
10
Spanish economic outlook | June 2017
Credit starts flowing to businesses once again
11
Source: Bank of Spain and Bankia Research
-60
-40
-20
0
20
40
60
Jan
-16
Feb
-16
Mar
-16
Ap
r-1
6
May
-16
Jun
-16
Jul-
16
Aug
-16
Sep-
16
Oct
-16
Nov
-16
Dec
-16
Jan
-17
Feb
-17
Mar
-17
y/y
rate
of
chan
ge %
New loans to large firms
13.8%
39.7%
-10
0
10
20
Jan
-16
Feb
-16
Mar
-16
Ap
r-1
6
May
-16
Jun
-16
Jul-
16
Aug
-16
Sep-
16
Oct
-16
Nov
-16
Dec
-16
Jan
-17
Feb
-17
Mar
-17
y/y
rate
of
chan
e %
New loans to SMEs
33.9
49.2
27.7
0
20
40
60
80
100
120
Dec
-07
Dec
-08
Dec
-09
Dec
-10
Dec
-11
Dec
-12
Dec
-13
Dec
-14
Dec
-15
Dec
-16
New credits to non-financial corporations(2007 = 100)
Total
SMEs
Large firms
Spanish economic outlook | June 2017
Surge in tourism key to Spanish economy
Country remains attractive to tourists compared to competing destinations
12
12%
6%
Spanish economic outlook | June 2017
Spike in inflation has hit its peak
Trend shaped by energy prices
13
Main downsides stem from effect on competitiveness and on purchasing power of households.
The other side of the coin is the effect on nominal GDP growth and therefore, tax receipts and deleveraging.
Spanish economic outlook | June 2017
How is the Spanish economy performing?
Inflection point not yet reached, raising growth forecasts
14
Spanish economy is not only not slowing down, it is actually gaining strength
Rate of job creation is on the up
Expectations and confidence indicators are improving
Tourism sector continuing to have a very positive impact
Exports are increasingly buoyant and rising faster than imports
Spending decisions that were delayed due to uncertainty are now being acted upon
Property sector recovery is gathering pace
Demand for finance has reignited
Downside risks are waning
1
2
3
Spanish economy surprisingly upbeat
Growth drivers
Forecasts once again bright
Spanish economic outlook | June 2017
More balanced composition of growth
All components of GDP are contributing positively to growth, and the countercyclical nature of external demand has been broken
16
Spanish economic outlook | June 2017
More robust growth figures
Initial boost came from exports
17
GDP has returned to 2008
levels, although the share of
each component has
changed.
Excessive share of
construction and imports has
been corrected.
Spanish economic outlook | June 2017
Leading to highest current account surplus on record...
Although high level of external debt means country is still extremely vulnerable
18
85.7%
2.1%
of GDP
Spanish economic outlook | June 2017
... thanks to an improvement in competitiveness...
Reflected in the increased share of world exports of merchandise
19
Spanish economic outlook | June 2017
... and efforts to internationalise
Renewed push to ramp up exports, which had been curtailed over the last decade
20
Spanish economic outlook | June 2017
Financing capacity has allowed progress to be made in reducing high levels of debt
Private sector has done much to degear
21
Spanish economic outlook | June 2017
Deleveraging process reaching its conclusion
Outstanding stock of loans continues to shrink, albeit at an increasingly moderate rate, while rate of new lending is on the up
22
-4,6
-2.2
-6.1
-3.3
-3.4-1.4
-25
-20
-15
-10
-5
0
5
Dec
-11
Mar
-12
Jun
-12
Sep-
12
Dec
-12
Mar
-13
Jun
-13
Sep-
13
Dec
-13
Mar
-14
Jun
-14
Sep-
14
Dec
-14
Mar
-15
Jun
-15
Sep-
15
Dec
-15
Mar
-16
Jun
-16
Sep-
16
Dec
-16
Mar
-17
y/y
rate
of
chan
ge %
Total Non-Financial corporations Households
Loans. Households & Non-financial corporations
170
107
90
50
100
150
200
Mar
-03
Mar
-04
Mar
-05
Mar
-06
Mar
-07
Mar
-08
Mar
-09
Mar
-10
Mar
-11
Mar
-12
Mar
-13
Mar
-14
Mar
-15
Mar
-16
Mar
-17
% o
f G
DP
Spain Italy Germany France Euro area
Loans. Households & Non-financial corporations
- €640 billion
Last 12 months
Source: BCE & Bankia Estudios Source: BdE & Bankia Estudios
Spanish economic outlook | June 2017
Major impact of drop in debt servicing costs, especially for businesses
Greater fall in interest paid than interest received
23
Compared to 2008, interest paid by households has
decreased by €34.7 billion, while they received €26.54
billion less in interest.
Over the last eight years, businesses’ interest payments
have fallen by over €48.7 billion, compared to a
reduction in interest received of just €5.766 billion.
Spanish economic outlook | June 2017
Progress made and challenges ahead after a deep, drawn out crisis
Flow variables brighter, although certain stock measures remain weak
24
More balanced growth
Greater competitiveness
Internationalisation of business
Foreign trade surplus
Degearing of private sector
Correction of budget deficit
Cleaning up of financial sector
High unemployment rate, especially among young people
Notable salary cuts
Slow improvement in productivity
High level of external debt
Structural public debt
Structural imbalance in pension system
1
2
3
Spanish economy surprisingly upbeat
Growth drivers
Forecasts once again bright
Spanish economic outlook | June 2017
Forecasts once again bright
Upward trends
26
The satisfactory tone of the latest indicators is steering forecasts upwards.
If risks abroad do not have a negative impact on the global economy, GDP may grow at a faster rate than was projected in the near term.
Spanish economic outlook | June 2017
Are drivers being undervalued?
27
Global growth scenario brighter
Boost from tourism due to heightened geopolitical risks in competing destinations
Signs of constrained investment and consumption
Impact of interest rate cuts on financing cost
Greater competitiveness and less elasticity of imports than domestic demand
Keys to dynamism of Spanish economy
Risks prevailing, but with limited impact at present
Climate of domestic and foreign political uncertainty
Protectionism and growth in world trade
Brexit
Monetary policy (ECB tapering)
Spanish economic outlook | June 2017
We envisage the upswing to continue
Although the rate of recovery will slow as a number of temporary drivers are offset
28
y/y 2015 2016 2017 (p) 2018 (p)
Households consumption 2,8% 3,2% 2,6% 2,2%
General Government consumption 2,0% 0,8% 1,2% 1,3%
Gross Fixed Capital Formation 6,0% 3,1% 3,8% 4,1%
Equipment 8,9% 5,0% 5,3% 5,0%
Construction 4,9% 1,9% 3,2% 3,5%
Domestic demand contribution (pp) 3,3 2,8 2,4 2,2
Exports 4,9% 4,4% 5,0% 4,2%
Imports 5,6% 3,3% 3,8% 3,8%
External demand contribution (pp) -0,1 0,5 0,5 0,3
Real GDP 3,2% 3,2% 2,9% 2,5%
Nominal GDP 3,7% 3,6% 4,7% 4,5%
Inflation (yearly average) -0,5% -0,2% 2,2% 1,6%
Employment 3,0% 2,9% 2,6% 2,2%
Employment (y/y thousands, 4Q) 492 463 475 355
Unemployment rate (yearly average) 22,1% 19,6% 17,2% 15,2%
(p) Bankia Estudios forecasts.
3.2% 2.9%
2.5%
Spanish economic outlook | June 2017
Strong employment growth
Increase in household wealth
Favourable forecasts
Low interest rates
Postponed spending decisions now being acted upon
Key household consumption factors
29
Slower uptick in disposable income
Loss of purchasing power due to rising inflation
Need to continue deleveraging...
... and re-establish low savings rates
Spanish economic outlook | June 2017
Favourable borrowing conditions
Brighter demand forecasts
Projects postponed in 2016 now being started
Acceleration of housing segment
Greater contribution of intangible investment
Greater use of production capacity
Key investment factors
30
Greater tax burden on businesses
Sluggishness of public works activity
Spanish economic outlook | June 2017
Key external demand factors
31
Dynamism of global markets
Internationalisation of business
Competitiveness gains
Favourable exchange rate
Boost from tourism
Decent sales of other services
Imports replaced by national output
Loss of competitiveness due to second period of rising inflation
Brexit
Potential rise in protectionism
Oil price hike
Spanish economic outlook | June 2017
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Spanish economic outlook | June 2017