Download The Kingdom of Spain`s Funding Programme for 2016

The Kingdom of Spain:
Funding Programme for 2016 &
Economic Policy
April 2016
Highlights
 Reduction of the net issuance of the Spanish Treasury to €40 bn
 Balanced economic growth underpinned by far-reaching structural reforms; joint private
and public deleveraging compatible with investment & consumption growth:
• More than 42% of employment generated in the Euro Area since 2014 created in Spain;
reduction of structural unemployment supports consumer confidence
• Broad-based expansion across all economic sectors
 Thanks to a more competitive economy, growth consistent with current account surplus
and gradual rebalancing of the net international investment position
 Tailwinds to growth: negative inflation, tax reform and reduced energy bill enhance
disposable income dynamics
 Debt-to-GDP ratio of the General Government peaked in 2014, projected downward
trend; measures adopted to reinforce commitment to fiscal consolidation
Introduction
1
Introduction
-40
-60
6
-80
4
-100
-6.77
-9.46
2008
-6.62
-5.79
-5.00
-9.29
-11.02
2009 2010 2011
Central government
Local government
General government
2013 2014 2015
State government
Social security funds
NIIP
105
100
25%
20%
85
-3
2015
NIIP Excl. Valuation Effects
Debt-to-GDP of the General Government
(% of GDP)
90
0
-6
2012
-120
95
3
-97.7
99.17
Reduction in the Cyclically Adjusted
Primary Deficit 2012-2014
5.3
(pp of GDP)
-90.5
Valuation
Effects
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
9
-52.7
-63.9
99.29
2007:
CA Balance
-9.65%
0
6
-4.42
-20
8
2
Net International Investment Position
(% of GDP)
93.7
Budget Balance by Administration
(% of GDP)
10
2014
2005
Current+Capital Acc.
CA Balance +1.3%
0
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
2
0
-2
-4
-6
-8
-10
-12
Current Acc.
12
80
Lithuania
Portugal
Iceland
Spain
New Zealand
Greece
Ireland
United States
Denmark
Slovenia
G7
G20 Advanced
Netherlands
Average
Italy
Australia
Euro Area
Slovak Republic
Canada
Czech Republic
France
Belgium
Japan
Germany
Austria
United Kingdom
Israel
Hong Kong SAR
Latvia
Luxembourg
Finland
Malta
Switzerland
Korea
Sweden
Norway
Singapore
EXTERNAL
SECTOR
2.26
1.80
1.33
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
Goods & Services
PUBLIC SECTOR
Adjustment
since 2007
Current Current
AccountAccount
Adjustment
since 2007
pp of GDP)
2016:
(In pp of (In
GDP)
Current Account
(% of GDP)
4
2
0
-2
-4
-6
-8
-10
2013
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
Gross Capital Formation
Exports of Goods & Services
Imports of Goods & Services
Euro Area Average
2012
15
172.1
2011
20.7
21.9
20
2010
25
2009
30.7
217.5
2008
33.5
31.9
2007
31.6
30
Private Sector Debt-to-GDP Ratio
(% GDP)
230
220
210
200
190
180
170
160
150
140
15%
10%
5%
85.4
35
Unemployment Rate
(% of Active Population)
2006
Investment, Exports and Imports
(% of GDP)
2003
DOMESTIC
IMBALANCES
Correction of imbalances
75
-0.1%
70
0%
-5%
2012
2013
2014
Debt to GDP ratio (lhs)
2015
Growth rate (rhs)
2
1. The Funding Programme in 2015 & 2016 forecast
1.1 The Funding Programme for 2016
1.2 Main Execution highlights
2. Transformation of Spain’s growth model
3. Spanish Economic Policy & Reforms
Page 4-5
Page 6-12
 Net issuance to €40 bn, less than half
than in 2012
(In billon euros and in effective
terms)
End 2015
Forecast
2016
47.717
40.000
236.817
221.694
139.000
120.301
95.997
84.301
43.003
36.000
Gross Issuance
97.816
101.393
Amortisation
93.103
97.393
Net Issuance
4.713
4.000
Total Net Issuance
 Total issuance so far €79.2 bn (35.7% of
the funding programme), of which €44.2 bn
medium- and long-term gross instruments
(36.7%), and €35.1 bn of Letras (34.6%)
Total Gross Issuance
Medium- and Long-term
Gross Issuance 1
Amortisation
1
Net Issuance
1
Letras del Tesoro
1
The Funding Programme for 2016
The Treasury’s Funding Programme for 2016
Includes debt in o ther currencies, B o no s y Obligacio nes, lo ans and assumed debts.
The Treasury’s Funding Programmes Since 2012
Funding Programme in 2016
F'cast Net Issuance
(Jan.)
M&L-Term
Redemptions
F'cast Net Issuance (Jan.)
F'cast
Net
Issuance(Dec.)
(Jan.)
Gross
Issuance
Final
Net
Issuance
Gross Issuance
The Funding Programme in 2015 & 2016 forecast
Emisión Bruta
96.0
Bruta
Emisión
Bruta
Emisión
Gross Issuance
76.2
96.0
96.0
84.3
62.3
96.0
50.0
76.2
76.2
Emisión Bruta
Emisiones netas y Amort. M&L
Plazo
76.2
62.3
62.3
96.0
62.3
76.2
50.0
50.0
50.0
62.3
& M&L-Term Redemptions
Net Issuance
M&L
y Amort.
netas
Emisiones
M&L
y Amort.
Emisiones netas
Plazo
Plazo
(In € bn)
(Gross issuance, € bn, April 18th 2016)
150
300
250
€221.7 bn
300
249.6
241.3
238.6
236.8
Projected Maximum
Executed
150
300
238.6 150 241.3
236.8
300
221.7
249.6
120
240
249.6
238.6 300 241.3
200236.8
150
238.6 240 241.3
236.8
96.6
249.6
240
238.6 120 241.3
236.8
120
240
96.6
90
180
180
120
240
96.6
73.7
73.7
150
65.0
€120.3
90
180
96.6
65.0
90
180
73.7
73.7
55.0
55.0
120
65.0
180
71.0 6090
65.0
€101.4
120
73.7
55.0
40
55.0
71.047.7
60
12035.7%
36.8
60 55.6
120
100
71.0
65.0
71.055.6
55.0
47.7
36.8
47.7 120
36.8
47.7
55.6
60
55.6
71.060
30
60
36.7%
47.7
36.8
30 55.6
60
30
60
34.6%
50
0
30
60
0
0
0 0 2014
2013
2015
00
2012 2015
2013
2014
2012
2014 20142015
2016
(f) 0
rm Redemptions
Final Net 2013
Issuance
(Dec.)
0
2012
2013
02015
et Issuance (Jan.)
Gross
Issuance
M&L-Term
Redemptions
Final
Net
Issuance (Dec.)
2012
2013
2014
2015
Total
Medium-& Long-Term
Letras
M&L-Term Redemptions
Final Net Issuance (Dec.)
Gross Issuance
Source: Secretaría General del Tesoro y Política Financiera.
Link to Data
4
The Funding Programme in 2015 & 2016 forecast
The Funding Programme for 2016
The Treasury’s Funding Programme for 2016
 The Treasury will cover most of the funding needs of Regions and Local Governments
 The bulk of the funding programme to be executed via auctions of Letras, Bonos &
Obligaciones
 The first auction of each month the Treasury may include EA inflation-indexed bonds
 Issuance via syndications
 The Treasury is open to the issuance of alternative instruments
 Medium Term Notes in currency other than the Euro
 Private Placements via the Primary Dealer’s Group: efficiency, size & diversification
of the investor base
 As in previous years, possibility of special auctions
5
 In January 2016, the Spanish Treasury has
launched its first syndicated transaction of the
year. The new €9bn 10-year benchmark issue
(due 30 April 2026) has a 1.95% coupon and
was priced at a spread of 105 bps over mid
swaps implying a reoffer price of 99.672
 In March 2016, the Spanish Treasury has
launched a new €5bn 30-year benchmark issue
(due 31 October 2046) with 308 accounts
participating in the transaction and a high
quality final order book close to EUR 14 billion
 The new SPGB 30-year benchmark has a
2.90% coupon and was finally priced with a
reoffer yield of 2.954% and a reoffer price of
98.931% at a spread of 185 bps over mid
swaps
JANUARY - NEW 10 YEAR REFERENCE. APR. 2026
Geographic Distribution (%)
Other
Eur. 5.5%
Other
0.9%
US/
Canada
11.8%
Nordics
7.3%
By Type of Investor (%)
Other
Hedge 0.8%
Fund
5.5%
Central
Bank/OI
6.6%
Spain
34.6%
Banks
38.3%
Pension /
Insurance
11.3%
Main Execution Highlights
Syndicated issuance in 2016
Germany
/Austria/
Switz.
7.1%
United
Kingdom
23.3%
France
/Italy
9.4%
Fund
Manager
37.6%
MARCH - NEW 30 YEAR REFERENCE. OCT. 2046
Geographic Distribution (%)
Asia /
Middle
East
1.3%
US /
Canada
10.0%
Other Nordics Other
Europe 3.6% 0.5%
3.6%
By Type of Investor (%)
Hedge
Fund
8.0%
Spain
15.0%
Other Central
3.7% Bank/OI
1.1%
Banks
29.5%
Pension /
Insurance
12.5%
UK /
Ireland
18.8%
Germany
/ Austria
/ Switz.
35.8%
France
/Italy
11.5%
Fund
Manager
45.1%
Link to Data
The Funding Programme in 2015 & 2016 forecast
6
ILB Supply Since 2014 by Maturity. Breakdown by Issuer
(€bn. EMU HIPC and National IPC-Linked)
35
30
25
20
15
10
5
0
Total
Outstanding
€ Inflation
9.7%
250
8.7%
200
6.8%
8.7%
150
9.5%
6%
11.8%
100
50
2046
2044
2043
2041
2040
2032
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2016
Italy
France
Germany
5
4
4
3
3
2
2
1
1
0
0
Auctions (lhs)
The Funding Programme in 2015 & 2016 forecast
bps
5
Syndications (lhs)
Italy
France Germany Spain
Italy
2014
France Germany
2015
of which ILB issuance
Share of Inflation-Linked Bonds in Total Outstanding
(€ bn & Percent)
6
2015
Spain
Gross L&M term issuance
6
2014
0
Spain
Spanish Linker Supply, Auctions & Syndications
(€ bn lhs and bps rhs)
€ bn
Share of Total Inflation-Linked Bond Issuance
in Medium- & Long-Term Issuance
(€ bn & Percent)
300
16%
Main Execution Highlights
Spain’s Euro inflation-linked programme
2016
Auction Tails (rhs)
2,000
5.6%
1,500
7.2%
4.6%
6.5%
1,000
7%
2.5%
500
0
Spain
Total outstanding
Italy
France
of which EMU HCPI
Germany
National CPI
7
Cost of Debt Outstanding and Cost at Issuance
(*As of April
5
18th 2016,
Average Life of Debt Outstanding
7.0
in percent)
Main Execution Highlights
Cost and life of debt: longer tenors at historically low rates
(*As of April 18th 2016, in years)
6.8
4
3.02
6.56
6.6
2
6.4
0.80
6.28
6.2
2016*
4.0
20%
2.0
0%
0.0
2010
<3
2011
3-5
2012
5-9
2013
2014
9-15
2015
>15
The Funding Programme in 2015 & 2016 forecast
2016*
Avrage.
2016*
2013
2012
2011
2010
2009
2008
2007
2006
2005
Average Tail (LHS, bps)
Bid-to-Cover
Jan 16
40%
Jul 15
6.0
5.1
Jan 15
8.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Jul 14
8.5
10.0
9.1
7
6
5
4
3
2
1
0
Jan 14
60%
7.6
12.0
Jul 13
9.6
Average Tails at Auctions & Bid-to-Cover at Mediumand Long-Term Auctions
Jan 13
11.1
7.6
2004
2015
2014
(*As of April 18th 2016, in years)
80%
6.0
Cost at Issuance
Marginal Life and Average Life at Issuance of
Bonos and Obligaciones
100%
6.20
Tail (bps)
Cost of Debt Outstanding
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
0
2014
1
6.45
2015
3
Bid-to-cover (RHS)
Source: Secretaría General del Tesoro y Política Financiera.
Link to Data
8
Change in Term Investment by Investor Type
Holdings of Unstripped Government Debt
(Term Investment. € bn)
55%
Resident Credit Inst.
Pens. & Ins., Mutual
Funds
Other Financial Inst.
Households & Nonfinancials
0
Public Administrations
45%
35%
+204,2 bn
30%
2012 Aug 2012 2013
30.5%
(€174.5 bn)
2009 2010 2011 2012 2013 2014 2015 2016*
9%
Jan 2016
9,4%
(€75,8 bn)
8%
7%
6%
5%
4%
2016
2015
2014
2013
2012
3%
Registered Holdings
2015
Term Investment
Term Investment
+1 bn
30%
Jan 2016
25,3%
(€203,9 bn)
25%
Aug 2012
26,2%
(€149,9 bn)
20%
Feb 2016
18%
(€142,9 bn)
15%
Registered Holdings
Term Investment
Source: Secretaría General del Tesoro y Política Financiera.
The Funding Programme in 2015 & 2016 forecast
2016
35%
2013
Jun 2012
8.9%
(€51.6 bn)
Aug 2012
35,4%
(€202,9 bn)
40%
2012
Feb 2016
10%
(€79.5 bn)
Resident Credit Institutions (%)
11%
10%
2014
Registered Holdings
2016: Year-on-year change. January 2015 to January 2016
Bank of Spain (%)
Aug 2012
33.5%
(€191.8 bn)
40%
Non-Resident
-40
Jan 2016
47%
(€378,7 bn)
2015
40
50%
2014
80
Feb 2016
53,3%
(€424,1 bn)
2016
Bank of Spain
Non-Resident (%)
120
Main Execution Highlights
Recent trends in investor base
Link to Data
9
Monthly Maturity Structure in 2016
as of March 31st 2016
(€ bn)
25
15
10
5
0
Jan Feb Mar Apr May Jun
(% of estimated 2016 GDP. April 2016 to March 2017)
20%
338.7
15.7%
265.9
58.7
Jan Feb Mar Apr May Jun
6.2%
186.5
170.0
Spain
Belgium
France
Other
Link to Data
Jul Aug Sep Oct Nov Dec
Personal Income Tax
Corporate Income Tax
VAT
Excise Duties & Other
Degree of concentration of tax collection
-
+
Germany
Sources: Secretaría General del Tesoro y Política Financiera for Spain,
29th data for Italy (Mar16-Feb17), and Bloomberg for other countries.
The Funding Programme in 2015 & 2016 forecast
Obligaciones
Administrative Distribution of Tax Collection
0%
Italy
Bonos
Jul Aug Sep Oct Nov Dec
Source: Secretaría General del Tesoro y Política Financiera.
14.4%
12.2%
10%
5%
T-Bills
Includes FFPP &
Regional & Local
Liquidity
Mechanisms
20.7%
15%
Tax collection
intensity
20
Relative Redemptions of Central Governments
25%
Main Execution Highlights
Prudent debt management
 Redemption dates of medium- and longterm bonds (mainly January, April, July and
October) are accommodated to match the
dates of biggest inflows of tax revenues
 Excess liquidity is lent in the money market
each month through weekly, bi-monthly and
monthly repo auctions
Link to Data
10
st
Main Execution Highlights
A more liquid debt market despite spread tightening
Reduction in Yield Level of 10 Year Government Bonds
 Significant tightening in sovereign
Since 2013 of Selected Countries
450
(In bps. March 31 2016)
spreads
400
382,8
350
 Rates have stabilised for longer periods,
300
326,9
250
enabling more efficient investment
200
decisions by market agents, rendering
150
153,6
151,1
liquidity in secondary markets a key factor
100
116,3
113,6
50
0
ESP
Bid-Ask Spreads of Government Bonds
BEL
FRA
NL
DE
Turnover Bonos & Obligaciones
(In bps . February 29th 2016)
(€bn. February 29th 2016 )
625
30
ITA
5,0
25
4,0
500
3,0
20
2,0
15
375
1,0
Oct
Jul
Apr
Jan
Oct
Jul
Apr
Jan
Oct
Jul
Apr
Jan
10
250
5
125
0
2012
2013
2014
5Y
2015
10Y
2016
15Y
0
2012
2013
2014
2015
2016
Link to Data
The Funding Programme in 2015 & 2016 forecast
11
Rating and Rating Actions vs.
Spread to 10Y Bunds
(rating)
Aaa/AAA/AAA
Aa1/AA+/AA H
Aa2/AA/AA
(basis points)
-25
0
25
50
75
100
125
150
175
200
225
250
275
300
325
350
375
400
425
450
475
500
525
550
575
600
16
14
Aa3/AA-/AA L
A1/A+/A H
12
A2/A/A
A3/A-/A L
10
Baa1/BBB+/BBB H
Baa2/BBB/BBB 8
Baa3/BBB-/BBB L
Ba1/BB+/BB H 6
Ba2/BB/BB
Ba3/BB-/BBB L 4
B1/B+/B H
B2/B/B
2
B3/B-/B L
S&P
FITCH
DBRS
Announced Rating dates
DBRS
January
February
March
April
May
June
July
August
September
October
November
December
Fitch
29
S&P
Moody's
19
8
1
17
29
30
7
14
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
0
MOODY'S
Main Execution Highlights
Evolution of Ratings
Risk Premium (rhs)
Link to Data
The Funding Programme in 2015 & 2016 forecast
12
1. The Funding Programme in 2015 & 2016 forecast
2. Transformation of Spain’s growth model
1.1 Recent macroeconomic trends
1.2 The structural transformation of the labour market
1.3 Consumer confidence back to 2007 levels
1.4 The adjustment of the financial sector
1.5 New credit flows consistent with deleveraging
1.6 Positive price developments in the construction sector
1.7 From net borrower to net lender
3. Spanish Economic Policy & Reforms
Page 14-16
Page 17-19
Page 20
Page 21-23
Page 24-26
Page 27
Page 28-32
Recent macroeconomic trends
Spain is growing consistently and in a balanced way
 Spain grew twice as fast as the Euro Area in 2015
 Growth driven primarily by investment, followed by private consumption
 958,800 more employees than in end-2013
Macroeconomic scenario (YoY growth rates in percent)
2014
2015
Full year Q1
2016 2017
Q2
Q3
Q4
2.5
2.9
3.5
3.5
1.5
2.5
3.0
3.7
6%
6.1
6.3
6.7
6.4
3.1
3.4
4.1
4.1
4%
5.8
6.0
4.5
5.3
7.6
7.4
7.2
Private consumption expenditure
General Government consumption expenditure
Gross Fixed Capital Formation
National Demand*
Exports of goods and services
Imports of goods and services
External demand*
1.2
0.0
3.5
1.6
5.1
6.4
-0.2
3.1
2.7
6.4
3.7
5.4
7.5
-0.5
7.7
0%
-0.4 -0.2 -0.7 -0.6
-2%
Gross Domestic Product
1.4
3.2
2.7
3.2
3.4
3.5
3.5%
2%
2.7** 2.4**
-4%
-6%
Other macroeconomic variables
2014
Unemployment rate (in %)
Gross Domestic Product
(Year-on-Year Growth Rates)
-8%
2015
Full year Q1
Q2
Q3
Q4
24.4
22.1
Full-time Equiv. Employment (YoY Growth)
1.1
3.0
2.9
2.9
3.1
3.0
Net lending(+)/borrowing(-) with RoW (% of GDP)
1.6
1.5
1.7
2.0
2.2
--
0.6
0.5
0.5
0.7
0.7
GDP deflator (YoY Growth)
-0.4
Deficit Excl. Financial Sector One-Offs (in % of GDP) -5.78
Source: Ministerio de Economía y Competitividad.
* Contributions to GDP in p.p.
** Forecasts for 2016-2019 to be released on April 29th
TRANSFORMATION OF SPAIN’S GROWTH MODEL
-4.2
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
EA
23.8 22.4 21.2 20.9
Source: Eurostat.
Spain
France
Italy
Link to Data
-0.72 -2.87 -3.05 -5.00
Link to Data
14
 Advance estimates for 2016Q1: 0.7% QoQ
 growth momentum maintained
3.2
2.6
2.4
1.9
1.5
1.9
1.1
1.0
Manufacturing PMI
(Index, >50 expansion)
60
58
56
54
52
50
48
46
44
42
40
2012 2013 2014 2015 2016
UK
Japan
Spain
Italy
France
Euro Area
Germany
Link to Data
Source: IMF.
Sources: Bloomberg & Eurostat.
TRANSFORMATION OF SPAIN’S GROWTH MODEL
1.5
0.5
USA
 The positive effects of structural reforms
explain the differential improvement
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Adv.
Economies
 Positive tailwinds shared across the Euro
Area: low oil prices, weaker exchange rate,
low interest rates, improved credit conditions,
neutral fiscal conditions
Growth Forecasts for 2016. International Monetary Fund
(Year-on-Year Growth Rates)
World
 Spain set to be the fastest growing
advanced economy in 2016
Recent macroeconomic trends
Growth is less vulnerable to international volatility
Economic Sentiment Indicator
(Index, long-term average=100)
120
115
110
105
100
95
90
85
80
2012 2013 2014 2015 2016
Link to Data
15
 The economic recovery is wide-spread in terms
of gross value added and employment:
Gross Value Added. 2014=100
 Professional & Technical services, industry
and trade supported by gains in external
competitiveness and structural reforms
 Recent pick-up in construction and real
estate spurred by lower indebtedness and
favourable price dynamics
Weighted Average Percentage of Branches of Economic
Activity with Positive QoQ Employment Growth
Recent macroeconomic trends
Recent macroeconomic data and trends
Full-Time Equivalent Employment. 2014=100
100%
80%
69%
60%
40%
30%
20%
0%
2008 2009 2010 2011 2012 2013 2014 2015
Source: National Statistics Institute.
TRANSFORMATION OF SPAIN’S GROWTH MODEL
Link to Data
16
GDP and Private Sector Employment
(Year-on-Year Growth Rates)
5.0%
Growth Required for Private Employment Creation
(Quarterly Data, Seasonally and Calendar Adjusted)
5.0%
0.0%
2.5%
-2.5%
0.0%
Post-reform
-5.0%
-5.0%
-7.5%
Pre-reform
-10.0%
2008 2009 2010 2011 2012 2013 2014 2015
120
GDP
100
90
120
Link to Data
Real Productivity
(Index 1999=100, Seasonally and Calendar Adjusted)
120
DE
FR
UK
115
-7.5%
~1.5%
Lower growth for
net private sector
job growth
-10.0%
-5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5%
Priv. Sector Employment
Source: National Statistics Institute.
110
-2.5%
2015Q4: +3.1%
Y-o-y private employment
growth
2.5%
ES
IT
110
100
90
80
80
Link to Data
Source: National Statistics Institute.
Real Unit Labour Costs
(Index 1999=100, Seasonally and Calendar Adjusted)
115
DE
FR
UK
110
ES
IT
105
2015
2014
2013
2012
2011
2010
2009
2008
2015
2014
2013
2012
2011
2010
2009
2008
110
Y-o-y GDP growth
The structural transformation of the labour market
Labour market reform: a change in labour dynamics
 GDP and employment growing at the same pace
100
105
95
100
90
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
Link to Data
2003
2015
2014
2013
TRANSFORMATION OF SPAIN’S GROWTH MODEL
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
Source: Eurostat.
2002
80
2001
90
2000
85
1999
95
Link to Data
17
 Spain has generated 42.8% of all the employment created in the Euro Area since 2014
 Employment generated across a broad array of sectors
Labour Force Survey, 2015Q4
Breakdown by Branches of Economic Activity
Domestic Service
Public admin & defence; Social Sec.
Electricity, gas, steam & air conditioning
International Organisations
Arts, entertainment and recreation
Financial and insurance activities
Water supply; Waste & Remediation…
Real estate activities
Mining and quarrying
Information & Communication
Administrative and support service
Prof., Scientific & Technical activities
Construction
Manufacturing
Other Services
Wholesale & retail trade; repair of motor…
Agriculture, forestry and fishing
Transportation & storage
Human health and social work activities
Education
Accommodation and food services
-50 -25 0
Share in Employment Creation in the
Euro Area 2014Q1 to 2015Q4
(Percent and Thousands of Persons)
Year-on-Year
(Thousands of Persons)
vs 2013Q4
50%
+963.200
+710.800
+611.000
+305.400
40%
30%
20%
42.8%
31.6%
10%
27.2%
13.6%
3.2%
0%
Spain
25 50 75 100 125 150 175 200 225
Source: National Statistics Institute.
TRANSFORMATION OF SPAIN’S GROWTH MODEL
Link to Data
+72.200
The structural transformation of the labour market
Spain is the main contributor to employment creation in the Euro Area
Source: OECD.
Other Euro Germany
Area
Italy
Ireland
Link to Data
18
Evolution of Contracts by Type
(Year-on-Year Growth Rates)
Full-Time
Part-Time
 Structural unemployment falling since 2014
15%
15%
5%
10%
12.3%
3.4%
-5%
5%
1.9%
0%
-5% 35
30
-15%
-0.9%
-25%
31.5
25
2007
2008
2009
2010
2011
2012
2013
2014
2015
 Less reliance on temporary contracts, more
on part-time contracts than in the previous
decade
20%
2007
2008
2009
2010
2011
2012
2013
2014
2015
 Strong recovery in open-ended contracts
since 2014H2
Open-ended
20 National
Source:
Statistics Institute.
Temporary
15
24.8
Open-ended
Link to Data
Temporary
10
8.9
8.5
IRE
15.9
11.6
22.4
19.1
27.9
26.1
8.9
8.5
5
ES
IT
FR
2007
EU
EA
2015Q3
Source: National Statistics Institute and Eurostat.
IRE
0
DE
IRE
DE
IT
2007
EU
TRANSFORMATION OF SPAIN’S GROWTH MODEL
Link to Data
EA
Source: National Statistics Institute and Eurostat.
FR
2 years or more
10
5
ES
2015
2014
2013
1-2 years
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
Up to 1 year
10
0
25
15
15.5
16.4
-50%
-10.4%
-12.7%
-21.2%
2015Q3
30
20
15
0%
DE
2007
IT
50%
20
EU
2013 2014 2015
EA
25
FR
30
24.8
100%
35
31.5
150%
ES
40%
30%
20%
10%
0%
-10%
-20%
-30%
200%
Share of Temporary and Part-Time Contracts
in Total Employment
5
(In %)
0
Temporary
Part-Time
15.5
16.4
Structural Unemployment
(Unemployment pool by time unemployed,
Year-on-Year Growth Rates)
The structural transformation of the labour market
Declining structural unemployment
2015Q3
Link to Data
19
 Consumer confidence above 2007 levels
 Retail sales accelerating despite low inflation,
spurred by employment creation
120
7.5%
95.2
5.0%
4.0%
100
2.5%
0.0%
-2.5%
-5.0%
-7.5%
-10.0%
-12.5%
80
60
40
20
0
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
 Core inflation is starting to recover, and the
favourable inflation differential vs. the
European Union remains
Consumer Confidence & Retail Sales
(Levels and Year-on-Year Growth Rates)
Consumer Confidence (LHS)
Retail Sales Index (RHS)
Link to data
Source: Ministerio de Economía y Competitividad.
Registered Unemployment & Social
Security Affiliations
(Year-on-Year Growth Rates)
Inflation Differential vs. EU
(In %)
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
1.1%
-0.2%
-0.4%
24%
20%
16%
12%
8%
4%
0%
-4%
-8%
2016
2015
2014
Registered Unemployment
2013
2012
2011
2010
2009
Link to Data
-8.0%
2008
2016
2015
TRANSFORMATION OF SPAIN’S GROWTH MODEL
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Source: Ministerio de Economía y Competitividad.
2.81%
2007
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
-0.5%
-1.0%
-1.5%
-2.0%
The structural transformation of the labour market
Consumer confidence back to early 2007 levels
Social Security Affiliations
Source: Ministerio de Economía y Competitividad.
Link to Data
20
Adjustment in Deposit Taking Institutions
(Number of Employees and Branches)
280,000
Employees
Branches
265,000
50,000
45,000
250,000
235,000
220,000
30,921
205,000
36%
30%
TRANSFORMATION OF SPAIN’S GROWTH MODEL
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
0
Other Resident Sector Doubtful
Link to Data
Source: Bank of Spain.
Harmonised Non-Performing Exposures Ratios
& Coverage Ratio
60%
50%
30%
Link to Data
2005
Coverage Ratio
46.3%
EA Average 46%
20%
6.4%
10%
EA Average 7.3%
0%
CY GR SI PT IE IT AT ES SK LT BE FR LV DE NL FI EA UK
NPE Ratio
Branches (Right hand side)
Source: Bank of Spain.
50
29%
25%
35,000
2015
2010
2005
2000
1995
1990
1985
1980
Employees (Left hand side)
35%
40%
25,000
134.3
100
40%
70%
200
47%
150
45%
40,000
30,000
190,000
50%
2002
2003
2004
 Banks’ cleaned up impaired assets by
approx. €300 bn in 2012
197.2
55%
2001
 Better prepared for NPLs: Coverage ratio of
doubtful loans to Households and Corporates
has increased from 29% in 2008Q3 to 47% by
2015Q4
Doubtful Loans. Other Resident Sector
(LHS Coverage ratio/RHS in € bn)
2000
 Spain’s financial sector is now leaner, more
efficient and better capitalised
The adjustment of the financial sector
Adjustment and recapitalisation of the financial system (I)
Sources: ECB.
Coverage ratio (LLP/NPE)
Link to Data
21
 Harmonised disclosure now in restructured
and refinanced loans, NPLs, asset quality
across asset classes, concentration by sector,
etc.
 Doubtful loans declining steadily: -22.3% yoy
in January 2016
Breakdown of Year-on-Year Growth Rate of NPL
Ratio into its Components
45%
• Decrease in Loans to ORS since
peak (2008Q4): €551.4bn
• Increase in NPL: €63.8bn
35%
25%
15%
3.7%
5%
-5%
-15%
-22.3%
-25%
2010
 Improving equity-to-asset ratio and funding
gap
2011
2012
2013
2014
2015
Link to Data
8.0
160
154.0
120
7.0
6.8
140
130
7.5
151.0
150
6.4
5.9
6.5
115.5 6.0
5.8
2016*
2015
2014
2013
2012
2011
2010
Bankruptcy
Proceedings (lhs)
90%
60%
Unemployed (rhs)
10.1% 100%
30%
0%
0%
-100%
-30%
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2009
NPLs (€ mn, lhs)
200%
2016
2008
300%
2015
2014
2013
2012
TRANSFORMATION OF SPAIN’S GROWTH MODEL
2011
Lending to ORS / ORS Deposits (LHS)
Equity / Assets (RHS)
Link to Data
Source: Bank of Spain.
13.6%
14%
13%
12%
10.7%
11%
10%
7.8%
9%
8%
7%
5.3%
6%
5%
2010
2007
5.5
2006
110
NPLs, Unemployment &
Bankruptcy Proceedings
(YoY Growth Rates)
NPL Ratio
180
170
2016
Increase in Doubtful loans (Numerator)
Decrease in Total Loans (Denominator)
Mixed Effects (Not Assignable to Numerator or Denominator)
Source: Bank of Spain.
Equity-to-Assets and Lending-to-Deposits Ratio
8.5
(In %)
8.2
173.7
The adjustment of the financial sector
Adjustment and recapitalisation of the financial system (II)
Sources: Bank of Spain and National Statistics Institute.
Link to Data
22
3
SSM: Gross Adjustments in the 2014 AQR by
Country of Residence
(% of RWA and % of total)
Provisions on
sampled files
9.7%
2
34.5%
34.1%
1
Projection of
findings
Collective
provisioning review
21.7%
CVA & Fair Value
Review
0
GR CY SI PT AT LV EE IT MT SK BE FI NL LT IE DE LU FR ES
Source: Bank of Spain.
15%
EU
CET1 Ratio
13%
Spain
12%
11%
10%
12.4%
10%
12.8%
11.6%
9.8%
9.7%
11.8%
8%
Dec 2014
8%
15%
0%
EU
Jun 2015
Spain
Dec 2014
5%
Jun 2015
10%
3%
4.7%
5.5%
4.9%
5.7%
12.4%
5%
9.8%
9.7%
11.8%
0%
Dec 2014
70%
0%
60%
15%
50%
40%
30%
Spain
Jun 2015
10%
62.8%
59.2%
48.0%
20%
10%
EU
Dec 2014
Jun 2015
5%
47.3%
12.4%
9.8%
9.7%
11.8%
0%
Dec 2014
Jun 2015
Source: European
Banking Authority.
0%
Dec 2014
TRANSFORMATION OF SPAIN’S GROWTH MODEL
12.2%
12.4%
9%
5%
Leverage Ratios
 Enhanced and regular transparency to be
complemented with 2016 stress test exercise.
Under the 2015 EBA Transparency Exercise, the
sample of banks in the case of Spain (90% of
percentage of total leverage exposures) has been
much broader than the EU average (67%)
European Banking Authority.
Transparency Exercise Sample
14%
Cost to Income Ratio
 Positive evolution of main capitalisation, NPL
coverage ratios, cost-to-income & leverage ratio,
etc. in a EU-wide context
The adjustment of the financial sector
Adjustment and recapitalisation of the financial system (III)
Link to Data
Jun 2015
23
6
5
4
3
Italy
Spain
Germany
60%
2016
France
Link to Data
Source: ECB.
New Loans to Non-Financial Firms
(Smoothed. Year-on-Year Growth Rates)
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2
2005
 Consumer loans have been growing since
2013; loans for house purchase have been
growing since January 2014
7
2004
 New loans to SMEs (less than €1 million) are
growing since mid-2013, loans to larger
corporates also recovering strongly since early
2015
Lending Rates of New Loans to Non-Financial Corporations
(%. Maturity 1-5 Years and up to €1 mn)
2003
 Interest rates have converged in the Euro Area
New credit flows consistent with deleveraging
Increasing new loans to households & corporates
New Loans to Households. By Type of Loan
(Smoothed. Year-on-Year Growth Rates)
60%
40%
40%
20%
20%
7.0%
0%
0%
-20%
Source: Ministerio de Economía y Competitividad.
2016
2015
2014
2013
2012
2011
2010
2016
Consumption
2015
2014
2013
House purchase
2012
TRANSFORMATION OF SPAIN’S GROWTH MODEL
Link to Data
2011
Source: Ministerio de Economía y Competitividad.
Loans > €1mn
2010
Loans < €1mn
2009
Total Loans
2008
2009
-60%
2008
-40%
2007
-40%
2006
-20%
Other
Link to Data
24
Debt to GDP Ratios of Households and
Non-Financial Corporations
(% of GDP)
(Households)
(Corporates)
 Since 2010Q2 the private sector has
deleveraged by more than €485 bn
67.5
Spain
France
UK
Deleveraging of Households and
Non-Financial Corporations since 2010Q2
132.9
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
104.6
Germany
Italy
Spain
France
UK
10%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
3.5%
6.4%
5%
0%
-5%
2014
2013
2012
2011
Source: ECB, Bank of Spain and National Statistics Institute.
2015
-7.3%
-10%
2010
2015
2013
2012
2011
2010
-6.8%
Household Debt/GDP
Household Consumption
TRANSFORMATION OF SPAIN’S GROWTH MODEL
Germany
Italy
Debt to GDP vs. Consumption & Investment
(Year-on-Year Growth Rates)
(Households)
(Corporates)
2014
 Households by €183.0 bn
 Confidence and economic stability makes
private-sector deleveraging compatible with
growth in consumption and investment
84.7
140
130
120
110
100
90
80
70
60
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
 Firms by €302.0 bn
100
90
80
70
60
50
40
30
New credit flows consistent with deleveraging
And private sector deleveraging continues
Corporate Debt/GDP
Investment
Link to Data
25
21
19
17
3
2
18.7
1.4
1
25
vs Gross Operating Surplus
4
11
23.2
10.0
10
20
9
15
8
8.6
7
6.3
6
10
5
0
to Gross Disposable Income
to Gross Operating Surplus
Gross Operating Surplus to GDP
Interest to GDP
Link to Data
135.0
562.6
140
600
vs Gross Operating Surplus
22.8 5
23
30
2001
2003
2005
2007
2009
2011
2013
2015
6
5.7
vs Gross Disposable Income
25
115
500
109.5
90
426.0 400
65
300
40
200
2001
2003
2005
2007
2009
2011
2013
2015
vs Gross Disposable Income
Households
 Mortgage debt expected to amortise
quickly
Gross Operating Surplus and
Liabilities Excl. Equity to
Gross Disposable Income and
Interest Paid
Gross Operating Surplus
(% of GDP)
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
 Sounder cash-flows: Higher operating
surpluses to face liabilities, lower interest
burden
Non-Financial Corporations
 Firms are generating savings and reducing
their debt levels.
New credit flows consistent with deleveraging
Scenarios for corporate and household debt
to Gross Disposable Income
to Gross Operating Surplus
Source: National Statistics Institute and Bank of Spain.
TRANSFORMATION OF SPAIN’S GROWTH MODEL
Link to Data
26
 Prices bottomed-out around mid-2014, and
have shown a moderate upward trend
2013Q4 /
2007Q4
2015Q4 /
2013Q4
Gradual recovery in mortgages, new loans and
residential transactions since 2013
 Gross value added generated by the
construction sector is expanding since 2014Q2,
for the first time since 2008
-2.5%
House Price Index
(Growth Rates)
Extremadura
1.8%
Andalucía
4.8%
Melilla
7.1%
Galicia
2.7%
Canarias
4.2%
Murcia, Región de
4.6%
Asturias, Principado de
1.0%
7.4% Ceuta
7.8% Balears, Illes
Castilla - La Mancha
2.6%
Comunitat Valenciana
5.8%
Castilla y León
1.8%
National Total
6.1%
Cantabria
3.8%
1.6%
País Vasco
10.4%Madrid, Comunidad de
Rioja, La
1.8%
Aragón
0.7%
Navarra, Comunidad Foral de
8.2% Cataluña
-28.0%
-29.0%
-29.1%
-30.6%
-31.3%
-31.6%
-32.7%
-32.8%
-32.8%
-34.2%
-34.6%
-36.2%
-36.6%
-37.4%
-39.2%
-40.2%
-42.9%
-43.8%
-43.9%
-44.7%
-45% -35% -25% -15% -5%
5%
15%
Link to Data
Source: National Statistics Institute.
50%
Mortgages and Housing Transactions
(YoY Growth Rates)
18.3%
25%
10.9%
0%
Gross Value Added in Construction
(YoY Growth Rates, LHS / Weight in Total GDP, RHS)
10%
11%
10.5%
10%
5%
4.0% 9%
0%
8%
-5%
7%
-10%
-25%
5.0%
-15%
5%
2015
2014
2013
2012
Weight in GDP (RHS)
Source: National Statistics Institute.
2011
2010
TRANSFORMATION OF SPAIN’S GROWTH MODEL
2009
Link to Data
2008
Source: National Statistics Institute.
Mortgages smoothed
Transactions smoothed
6%
4%
2007
Original series
Original series
-20%
2006
-50%
2008 2009 2010 2011 2012 2013 2014 2015 2016
Positive price developments in the construction sector
Spain’s construction sector is beginning to recover
Gross Value Added (LHS)
Link to Data
27
Investment, Exports and Imports
Exports 2015
(% of GDP)
 The weight of exports in GDP has increased
from 21.9% in 2009Q1 to 33.5% by 2015Q4, in
line with the evolution in the number of exporting
firms
35
 Investment around Eurozone average
20
 Fourth consecutive yearly Current + Capital
Account Surplus (1.8% of GDP in 2015),
supported by falling oil prices
15
Euro Area 50.4%
31.6
30
30.7
25
Exports Year 2000
20.7
21.9
Euro Area 60.5%
Link to Data
Exports of Goods & Services
(Volume Index. 2008=100)
130
+51.5%
+28.9%
2015
160
150
140
130
120
110
100
90
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
Gross Capital Formation
Exports of Goods & Services
Imports of Goods & Services
Source: National Statistics Institute.
Evolution of Spanish Exporting Firms
(Index 2006=100)
33.5
31.9
From net borrower to net lender
External sector: from net borrower to net lender
120
+24.5%
110
Goods:
+28.4%
Non-Touristic Serv.: +18.5%
Tourism:
+13.1%
100
90
Source: Eurostat and National Statistics Institute.
IT
2015
FR
2014
2013
ES
2012
2011
TRANSFORMATION OF SPAIN’S GROWTH MODEL
Link to Data
DE
2010
Source: ICEX.
2009
Regularly Exporting firms
2008
2016*
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
Number of exporting firms
80
UK
Link to Data
28
Change in Share in Spanish Merchandise Exports since 2005
 Spain is diversifying its export base:
2
> -2.0%
 Increasing market share in Africa &
Middle East, Asia, North & South
America
0
2
3
46
-2% to -1.2% -1.2% to -0.7% -0.7% to -0.3% -0.3% to 0%
132
0% to +0.5%
# of
4 countries
>+0.5%
 Decreasing market share to EU,
Venezuela, Central America, parts of
southern Asia
From net borrower to net lender
Exports are more widely diversified
 Merchandise trade to the Euro Area
represents 50.4% in 2015 vs. 60.5% in the
year 2000
5
Weights of Faster Growing Economies in
Total Merchandise Exports
Current Account Balance
(% of GDP)
2.26
1.80
1.33
0
25
15.6%
17.4%
1.1 0.7
15
10
-10
3.1
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
Current Acc.
Current+Capital Acc.
Source: Bank of Spain.
TRANSFORMATION OF SPAIN’S GROWTH MODEL
Link to Data
0.8
Oceania
5
0
8.9
9.4
9.6
Asia
0.4
5.8
Goods & Services
22.9% <--- TOTAL %
20
0.6
-5
23.6%
2.5
2.5
3.0
1.0
2.3
South America
6.4
4.2
3.6
3.3
2.3
2.4
2.9
2.0
1.7
1.7
5.0
5.1
4.8
1.4
3.9
Central America
Subsaharan Africa
North Africa
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*
Source: Datacomex.
Link to Data
29
 Increasing imports of capital and
intermediate goods (excluding energy
imports) reflect an expansion in the gross
value added of the manufacturing sector;
motor vehicles, electric and electronic
products as well as machinery and
pharmaceutical products
Main Export and Import Products (YoY Growth)
(With Weight in Total 2013 Merchandise Exports >1%.
Smoothed data. In Brackets Share and % of Intermediate Goods)
OTHER ELECTRONIC, OPTICAL AND ELECTRIC PROD. (1.6)…
MOTOR VEHICLES (15.2) // (65.3)
AGRICULTURAL PRODUCTS (5.8) // (10.6)
AIRCRAFT AND SPACECRAFT (2) // (10.6)
CLOTHING (4.2) // (96.3)
PLASTICS (1.7) // (99.7)
CERAMIC (1.1) // (96.3)
PARTS AND FITTINGS OF MOTOR VEHICLES (3.6) // (98)
OTHER FOOD PRODUCTS (4.3) // (65.3)
OTHER CHEMICAL PRODUCTS (3.5) // (65.3)
MEAT AND MEAT PRODUCTS (2.2) // (65.3)
OTHER MACHINERY AND EQUIP. (5.7) // (47)
ELECTRIC MATERIALS AND EQUIPMENT (3.4) // (65.3)
METALLIC PRODUCTS EXCL. EQUIPMENT (3.3) // (65.3)
TEXTILE PRODUCTS (1.4) // (99.7)
LEATHER AND FOOTWEAR (1.8) // (65.3)
ALCOHOLIC BEVERAGES (1.4) // (10.6)
BASIC PHARMACEUTICAL PRODUCTS (4.4) // (95.1)
PAPER, PULP, PAPERBOARD & GRAPH. ARTS (1.1) // (9.7)
RUBBER PRODUCTS (1.3) // (99.7)
BASIC CHEM., FERTILIZERS, PLASTICS AND PESTICIDES…
ANIMAL AND VEGETABLE OILS AND FATS (1.4) // (74.5)
METALLURGIC & METALLIC PRODUCTS (5.7) // (65.3)
REFINED OIL & COAL/COKE (4.5) // (99.7)
-40% -30% -20% -10% 0%
-40% -30% -20% -10% 0%
Source: Ministerio de Economía y Competitividad.
TRANSFORMATION OF SPAIN’S GROWTH MODEL
10% 20% 30% 40% 50% 60%
Imports
AIRCRAFT AND SPACECRAFT (1.3) // (63.7)
MOTOR VEHICLES (7.8) // (80.6)
ELECTRIC MATERIALS AND EQUIPMENT (2.9) // (80.6)
OTHER ELECTRONIC, OPTICAL AND ELECTRIC PROD. (4.5)…
OTHER MACHINERY AND EQUIP. (5.7) // (46.7)
AGRICULTURAL PRODUCTS (3.2) // (63.7)
OTHER MANUFACTURED GOODS (1.9) // (20.9)
PLASTICS (1.8) // (24.5)
BASIC PHARMACEUTICAL PRODUCTS (5) // (95.8)
METALLIC PRODUCTS EXCL. EQUIPMENT (2.3) // (80.6)
TEXTILE PRODUCTS (1.4) // (100)
PAPER, PULP, PAPERBOARD & GRAPH. ARTS (1.2) // (20.9)
LEATHER AND FOOTWEAR (1.7) // (80.6)
OTHER CHEMICAL PRODUCTS (2.9) // (80.6)
OTHER FOOD PRODUCTS (4.4) // (80.6)
RUBBER PRODUCTS (1) // (24.5)
BASIC CHEM., FERTILIZERS, PLASTICS AND PESTICIDES…
CLOTHING (5.3) // (95.8)
METALLURGIC & METALLIC PRODUCTS (4) // (80.6)
PARTS AND FITTINGS OF MOTOR VEHICLES (5.9) // (98.5)
OFFICE MACHINES AND COMPUTERS (1.4) // (80.6)
SEWERAGE SERVICES (0.9) // (100)
FERROUS METALS (1.4) // (80.6)
NATURAL GAS (2.8) // (80.6)
REFINED OIL & COAL/COKE (2.8) // (24.5)
CRUDE OIL (8.8) // (95.8)
Exports
 Exports of consumption goods are
expanding in line with demand from Europe
and north America. Exports of capital goods
are recovering their previous growth trend
From net borrower to net lender
Imports are now increasing for investment and for re-export activities
10% 20% 30% 40% 50% 60%
Link to Data
30
 Tourism services are reaching historical
highs
Quarterly Services Balance
16
(€ bn)
12
 Most importantly, exports of services other
than tourism (exports of services to firms,
other professional services, IT-related
services, etc.) are expanding at notable
growth rates
8
4
0
-4
1993
1996
1999
2002
2005
2008
2011
Tourism. Original
Services Excl.Tourism. Original
Tourism. Smoothed
Services Excl. Tourism. Smoothed
Link to Data
Source: Ministerio de Economía y Competitividad.
8
Quarterly Balance of Services Other Than Tourism
(€ bn)
7
Personal & Cultural
Exports
(€ bn)
24
2014
From net borrower to net lender
Services exports expand the CA surplus
Imports
(€ bn)
24
Other Professional
6
Consultancy
5
R&D
18
18
12
12
6
6
Other Services to Firms
4
IT Services
3
Intellectual Property
2
Financial
1
Pension & Insurance
Construction
0
Transportation
-1
Repair
2013
2014
0
0
2013
2014
2015
2013
2014
2015
2015
TRANSFORMATION OF SPAIN’S GROWTH MODEL
31
 GDP growth is not linked to current account
deficits as in previous growth cycles
 According to the European Commission,
assuming nominal GDP growth and current
account balance at current levels the NIIP
would fall to -50% of GDP by 2024
10%
Current Account Dynamics vs. GDP Growth
(Year-on-Year Growth Rates and % of GDP)
5%
0%
-5%
-10%
-15%
2002
2004
2006
2008
CA Balance % of GDP
Breakdown of the Net International
Investment Position
2010
2012
GDP Growth
National Demand
2%
0%
-5% -4% -3% -2% -1% 0%
-400
1%
2%
3%
4%
5%
6%
-2%
-600
-4%
Valuation
Effects
-1,000
-6%
2008Q4-2011Q4
-8%
-1,200
2015
2013
2011
2009
2007
2005
2003
2001
1999
1997
1995
1993
NIIP
NIIP excl. valuation effects
Source: Bank of Spain.
TRANSFORMATION OF SPAIN’S GROWTH MODEL
Link to Data
-10%
-12%
7%
8%
9% 10%
Current Account to GDP ratio
2012
2014 & 2015
2015Q4
2013
-200
-800
2014
4%
(€ bn)
0
From net borrower to net lender
Net International Investment Position in the context of growth & CA surplus
2002-2008Q3
Y-o-Y Nominal GDP Growth
Sources: National Statistics Institute & Bank of Spain.
Link to Data
32
1. The Funding Programme in 2015 & 2016 forecast
2. Transformation of Spain’s growth model
3. Spanish Economic Policy & Reforms
2.1 Deficit reduction 2011-2015
2.3 Debt to GDP dynamics
2.4 Reform Policies 2012-2015
Page 34
Page 35
Page 36-44
Budgetary Execution in 2015
Deficit reduction 2012-2015
 2015 deficit outcome of –5.08% of GDP vs. an objective of -4.2%. Excluding the impact of
financial sector (-0.08% of GPD) and other one-offs (the deficit stood at -4.8% of GDP
 The slippage concentrated in in regional finances. Measures adopted:
 Coercive measures: non-availability of budgetary credit for non-compliant regions
 Corrective and preventive measures: publicised adjustment plans and cash projections to be
surveyed by the Independent Fiscal Authority and the Finance Ministry. Compliance with the
expenditure rule and with average payment period to suppliers
 Enhanced conditionality to be applied to regions seeking the assistance of existing liquidity funds
2011
2012
2013
2014
2015
Objective Outcome Objective Outcome Objective Outcome Objective Outcome Objective Outcome
Central Government
Autonomous Regions
Local Governments
Social Security Administrations
General Government
Financial Sector Impact
-4.8
-5.43
-3.35
-0.40
-0.10
-9.29
-0.33
-6.3
-4.25
-1.86
0.32
-0.98
-6.78
-3.67
-6.5
-4.48
-1.57
0.55
-1.12
-6.61
-0.29
-5.8
-3.57
-1.75
0.57
-1.04
-2.9
-0.7
0.0
-0.6
-2.53
-1.66
0.44
-1.26
-5.78
-0.10
-4.2
-5.00
-0.08
Source: Ministerio de Hacienda y Administraciones Públicas.
Link to data
2011 Net of the effects of the Regional Financing System
For further information refer to http://www.minhap.gob.es/es-ES/Prensa/Paginas/EstrategiaPoliticaFiscal.aspx
Spanish Economic Policy & Reforms
Budget Balance and its Determinants
(% of GDP)
46
5
44
0
42
40
-5
38
-10
36
34
-15
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Net Lending(+)/Borrowing. (% of GDP. Excl. Financial Sector One-Offs)
Revenues (LHS)
Primary Expenditure (LHS)
Expenditure (LHS)
Budget Balance (RHS)
34
 In 2015 the Debt to GDP ratio declined to 99.17% vs. 99.29% in 2014. This is the first year-onyear reduction in the ratio since 2007
Debt to GDP Ratio
(% of GDP and Growth Rate)
30
100
20%
25
95
93.7
90
80
5%
75
-0.1%
70
2012
2013
15%
10%
85.4
85
99.17
25%
99.29
105
2014
Debt to GDP ratio (lhs)
Spanish Economic Policy & Reforms
20
15
10
Increase
in debt-toGDP ratio
5
0%
0
-5%
-5
2007-2011
2015
Growth rate (rhs)
Source: Ministerio de Economía y Competitividad.
Breakdown of the Explanatory Factors of the
Debt-to-GDP Ratio
(pp of GDP)
Link to data
Debt to GDP dynamics
Debt to GDP fell in 2015
Primary Deficit
Interest
2012-2015*
One-Offs**
Other
Decline in
debt-toGDP ratio
GDP Growth
Source: Ministerio de Economía y Competitividad.
* Provisional estimates
** One-Off factors include: impact of financial sector recapitalisation, Loans to
Portugal, Ireland and Greece (EFSF), Fund for the Payments to Suppliers
(FFPP), Electric Tariff Deficit (FADE)
35
Reform Policies 2012-2015
Four years of structural reforms
2012: First Generation Reforms
Labour Market
Budgetary Framework
Financial Sector
2013: Second Generation Reforms
Labour Market Reform
Budgetary Plan
Financial Sector Reform
Services/Product Markets
Pension System Reform
Strategic Plan for Exporters
Serv. Market Liberalisation
Local Administrations
ICO Mediation Credit Lines
Single Market Law
De-indexation
Main Reforms 2014-2015
IMPLEMENTATION OF
REFORMS ADOPTED IN
2012-2013
Job
Activation
Strategy and
Plan for
Youth
Employment
Reform of the
Active Labour
Market Policy
Framework
Reform of
the Tax
System
New Legal
Framework for
Disintermediati
on and
Promotion of
Capital Markets
for SMEs
Measures to
Facilitate
Corporate
Recovery & Debt
Restructuring
Second
Opportunity Law
Reform of the
Insolvency Regime
Single Market/Market Unity Law
Economic Structural Reforms
Public Sector Reforms
Financial Sector Reforms
Spanish Economic Policy & Reforms
Links to detailed presentations
describing the Reform Agenda
Balance Reforms. Three years in
Government
OECD: CORA Reforms
36
 The reform of the public sector builds on the structural reform process initiated in 2012
New Regulatory Framework
Budgetary
Sustainability Law,
Fiscal supervisory
rules
Fiscal discipline at all levels
of the Administration
Early-warning system,
enforcement and sanction
procedures
Transparency: monthly and
quarterly execution
Assurance of compliance:
coercive measures and
enforced compliance
Law for Transparency in the
Public
Administrations:
accountability & governance
Reform of the Local
Authorities
Liquidity Measures for Regions & Local Governments
2012-2014
2015
FLA
FFPP
Undue expenditures
 Provision of
liquidity to
suppliers of
Local &
Regional
Governments
Transfer of competences
Mergers & integrated
management
Changes at minor local
entities
Resizing of the local public
sector
Temporary and exclusive
staff of local governments
 2012: €27.4
bn
 2013: €6.8 bn
 2014: €8.0 bn
 The
Programme has
been ended by
July 2014
 Enabling the
centralisation of
public debt
issuance in
Spain
 Providing
liquidity to
Autonomous
Regions
 Ensuring
fiscal and
financial
sustainability
 Strict
additional fiscal
compliance
ENHANCED
LIQUIDITY
MECHANISMS
Fund for the financing
of Local Governments:
Fondo de
Ordenación
Fondo de Impulso
Económico
Fund for the financing
of Regional
Governments
Financial facility
FLA
Embedded into
the Treasury’s
Funding
Programme
 2012: €16.6 bn
 2013: €23.0 bn
 2014: €23.0 bn
 2015: €39.9 bn
 2016: €26.0 bn
Reform Policies 2012-2015
The reform of the public administrations (I)
Stricter fiscal
conditionality &
issuance caps
Commission for the reform of the public administration
General measures
Sub-commission for administrative simplification
Sub-commission for management of common services and resources
Sub-commission on administrative overlap
Sub-commission for institutional administration
Electronic Billing Law
De-indexation Law
Spanish Economic Policy & Reforms
37
 In 2016 the Treasury will provide Regions and
Local Governments funding for up to €26.0 bn
Spanish Economic Policy & Reforms
Italy
Italy
France
Belgium
5
Special Statute
Regions
15
Regions
Ordinary
Statute
26
Regions
3 Regions
2 Com. Ling
 “Fund to Finance Supplier Payments” (FFPP)
aimed at paying the territorial administrations (both
regions and municipalities) for outstanding invoices
and, hence, regularising the arrears. This Fund was
extinguished in July 2014. The outstanding debt has
been assumed by the Spanish Treasury
Germany
16
Bundesländer
Since 2012 two auxiliary Funds were established by
the Central Government  FLA and FFPP
Education
Health
Transport
Economy
Justice
Universities
Police
Infrastructures
Environment
Housing
Local Entities
Culture
Tourism
Employment
Social Services
Austria
9
Bundesländer
 Together with the resources provided by the
Regional Financing System, regions have access to
region-specific taxes, transfers from the General
State Budgets, EU Funds…
Spain
17 Autonomous
Communities
 A highly devolved system of regional and local
competencies, more than elsewhere in Europe
















































Reform Policies 2012-2015
The reform of the public administrations (II)






Autonomous
Community
GDP
(Weight in
national GDP)
Liquidity
assistance
(€ bn)
(2012-2015)
FFPP
(€ bn)
TOTAL
(€ bn)
% of total
disbursements
Catalonia
18.9%
37.1
6.5
43.5
30.4
Madrid
18.8%
1.8
1.3
3.2
2.2
Andalusia
13.4%
15.1
5.0
20.0
14.0
Valencia
9.4%
21.8
7.5
29.3
20.4
Galicia
5.2%
1.6
0.0
1.6
1.1
Castile and Leon
5.0%
2.1
1.1
3.1
2.2
Canary Islands
3.9%
3.6
0.3
3.9
2.7
Castile - La Mancha
3.5%
4.8
4.0
8.8
6.1
Aragon
3.2%
1.5
0.5
2.0
1.4
Murcia
2.6%
3.7
1.8
5.4
3.8
Balearic Islands
2.5%
3.8
1.3
5.1
3.5
Asturias
2.0%
1.4
0.2
1.6
1.1
Extremadura
1.6%
0.9
0.4
1.3
0.9
Cantabria
1.1%
1.3
0.3
1.6
1.1
La Rioja
Local Governments
0.7%
0.3
0.1
0.3
0.2
1.0
11.6
12.6
8.8
38
 The Government’s
draft
law
was
presented on June
20th 2014
 Aims at reducing
taxation on labour, to
strengthen
competitiveness, to
promote saving and
investment,
and
modernise Personal
and
Corporate
Income tax
 Reinforcement of
the fight against tax
fraud
Changes to Personal Income
Tax
Changes to Tax on Capital
Changes to Corporate Income Tax
►Reduced general rate: from 30% to
►Reduction in number of
►Lower rates in two years and
25% in two years (reduced rate for new
tranches and rates in two years
more progressive
firms 15%)
VAT
►Health care products
VAT rate adapted to ECC
regulations:
►Modification of personal
-Intermediate products
income allowance:
for drug development,
►In the case of the financial sector kept
- Higher personal income
medical instruments and
at 30% (out for credit cooperatives and
minima
equipment, medical
►Capital gains generated in less
"Cajas Rurales)
- Family tax deductions:
devices and
than 12 months no longer
enabling negative tax rates for
pharmaceutical products
penalised
large families and with
dependent persons with serious
disabilities
►Elimination of tax deduction
for dividends
►Limits to exemptions to
severance payments in case of
unjustified dismissal
►Tax deductions for house
rental:
- Elimination for new rentals
(Expenditure side)
- Lower tax deductions for
house rentals (Income side)
►New savings instrument:
savings or insurance schemes
maintained longer than five
years ('Cuenta Ahorro 5'):
exempt form capital gains tax
►Update and simplification of
depreciation tables
►Lower tax withholding for
►Limit for deductible
►No deductibility of equity securities
professional and self-employed
contributions linked to pension impairments extended to fixed income
workers with incomes below
plans lowered to €8,000/year
portfolios and fixed assets
€15,000
►Limit to offset tax losses: 50%/25%
►Better fiscal treatment in case
►Limits to simplified method
depending on revenue in 2015; 60% in
of assets received in lieu of
('Modulos') to certain
2016 and 70% from 2017 onwards.
payment if affected by
professional activities
►To maintain income from the CIT, in
preference shares
2015 previous measures maintained
Spanish Economic Policy & Reforms
Fight Against Tax
Fraud
R&D and cultural investment
►Lists of defaulters to be
published
►Annual publication of
tax havens
Tax audit process: New
deadlines and suspension
of Statutes of Limitation
in specific situations
►Extension of partial exemption (85%) of
the tax on electricity. Exemptions extended
to all productive processes in which the
costs of electricity exceeds 50% of
production costs
Reform Policies 2012-2015
Tax reform: modernising the tax system
►Administrative
assessment in evidence of
tax fraud
►Substitution of deductions in CIT
l Deductions eliminated:
- Environmental investments
- Expenses for vocational training
- Reinvestment of extraordinary benefits
►Tax assessment cases
l New deductions (favouring the
are extended to
deleveraging process):
smuggling offenses
- Capitalisation reserves. 10% of corporate
income deducible if incorporated into
►New rules on the
reserves.
localisation of assets;
- Equalisation reserve for SMEs
taxing at destination of
►Better precision in the
l Limits to the financial expenditure
electronic,
indirect assessment
deductions (favouring the deleveraging
telecommunications and
regime
process, reduced to 30% of gross operating
radio-television services
profit)
when the addressee is a
private individual
►Interruption of the
limitation period of
related tax obligations
►Incentives for cultural activities
39
 Projections towards 2030-2060 point towards
a stabilisation in gross expenditure in public
pensions
Spanish Economic Policy & Reforms
18
16
2020
Before the
reform
14
2030
2050
2060
After the
reform
12
Source: European Commission and
Ministerio de Economía y Competitividad
Belgium
Austria
Greece
Italy
Luxembourg
Portugal
Finland
Germany
France
10
Spain
 A yearly update factor which links pensions
to the financial situation of the pension
system, to the number of pensioners and to
the average pension
 A life expectancy factor as from 2019,
which will be evaluated every 5 years
Gross Expenditure in Public Pensions
(% of GDP)
Spain B
 In December 2013, the Pension System
Reform was approved. It introduced two factors
to which pensions will be linked:
Reform Policies 2012-2015
The Pension System reform reduces the impact of population ageing
Link to Data
40
 The labour market reform tackles the main shortcomings of the Spanish labour market: high structural
unemployment, high youth unemployment, duality, high employment volatility and wage indexation which
limit gains in competitiveness
Labour market reform
Collective Bargaining
Internal Flexibility of Firms
External Flexibility of Firms
Contracts
 Dynamic bargaining more
responsive to the needs of
businesses and workers

rigidity
 Avoiding
Avoiding lay-offs: rigidity
fostered
means of
of
fostered job
job cuts as a means
adjusting
to
economic
changes
adjusting to economic
 Lack of flexibility avoided
innovation and gains in
competitiveness
 Reduction of severance pay
for unfair dismissals
 Crisis contract: new contract
for entrepreneurs aimed at
small businesses. It has a oneyear trial period. Tied to
employment tax breaks and
fiscal tax credit, specially for
hiring young workers. Breaks
and credits are designed to
limit the dead-weight effect
 Training and skill building:
deep regulatory modifications
to provide a structural change
and develop a dual training
system that allows a balance of
training and work
 Flexible
regulation
of
telework
 Part-time
contract:
increased flexibility, allowing
overtime
 Move beyond the model of
indexing salaries and wages
 Balanced
regulatory
framework in line with
economic circumstances
 Opting out from higher-level
agreements
 Priority of company-level
agreements
 Limiting
the
statutory
extension rule of expired
agreements up to one year
(unlimited before)
Spanish Economic Policy & Reforms
 Classification of workers
based on skills not on
professional occupations
 Simplification of rules for
the reallocation of workers
 Streamlining the adoption of
significant changes in working
conditions
 Furloughs/Time-reductions
if
legitimate
financial,
productive or organisational
reasons exist
 Distribution of workingtime
 Clear
and
objective
regulatory framework of fair
dismissals
 Severance pay for unfair
dismissal down to 33days/Max
24months of salary vs.
45days/Max 42 months
 Clarification of fair dismissal
causes (20days/Max 12 Mo)
 Removal of administrative
authorisation for collective
layoffs
 Elimination of procedural
salaries
 Fair dismissals for economic
causes of civil servants
 Streamlining of dismissals
based on absenteeism
Reform Policies 2012-2015
The labour market reform addresses Spain’s most important imbalance
41
 Activation policies complement the labor reform. Spain has reformed its public employment services
and launching new tools to fight against unemployment
PLANNING
+
COORDINATION
REGIONAL
GOVERNMENTS
ACTIVATION
POLICIES
Multi-annual
Activation Strategy
•
•
•
•
•
•
Common concepts, objectives and strategy
Result-oriented measures to increase efficiency
Funding linked to results
Efficiency monitoring through common sets of indicators
Sharing and implementation of best practices
Common IT system
Training for the
employment
•
•
•
•
•
Training priorities linked to real needs
Open competition to select providers
Monitoring, supervision and transparency
Online training
Professional certificates
Labour
intermediation
• Private-public collaboration
• Common rules to select providers
Hiring subsidies
• Improved design of hiring subsidies
• Better monitoring ex ante and ex post
Unemployment
benefits
• Rationalization, better targeting, conditionality
• Closer linkage to active labour policies
Annual Employment
Plans
Reform Policies 2012-2015
Activation policies & fight against unemployment
Vocational
training
national
Strategy
National
employment
website
TOOLS
Youth guarantee
Spanish Economic Policy & Reforms
Youth Employment and Entrepreneurship
Strategy
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 The Market Unity Law establishes uniform principles and regulations in order to guarantee the single
market in Spain, via regulatory cooperation among public administrations, involving the private sector
 Its main objective is to establish a more favourable regulatory framework in order to improve
competitiveness and to foster investment and economic growth. Main areas of work:
 Technical specifications & labelling of products
 Licences for self-employed in each region
 Public tender operations
 Commercial distribution: differences in licensing, opening hours, especial sales, etc.
Reform Policies 2012-2015
A Single Market in Spain: the Law for the Guarantee of Market Unity
 Initial impact estimates foresee an impact on long-term GDP (10 years) growth estimates of 1.52%
Regulatory Rationalisation
Economic Operators
Central Govt Administration: 184 regulations
identified  100 adapted
Regional Administrations: 450 regulations
identified  85 adapted & 64 in progress
123 Cases of conflict have been presented by
economic operators; 79 finalised
National Competition Commission
Agency For the Evaluation of Public Policies
6 regulations under study
Will analyse and publish results in 2016
Spanish Economic Policy & Reforms
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 The reform aims at increasing efficiency and legal certainty in insolvency procedures by ensuring that:
 Non-viable debts are resolved
 Viable debts are repaid and companies are able to continue with their activity
INSOLVENCY LAW REFORM
Enhancing out-of-court agreements
Simplification of in-court
insolvency procedures
Re-designing the judicial
administration
Second Opportunity/Fresh Start
Mechanism for individuals and firms
Facilitating the split and sale of
separated production units
Classification and register of
insolvency administrators according
to their past experience
Promotion of refinancing agreements
Adjustment of real-state guarantees
Simplification of Collective Refinancing
Agreements
Specific measures
-Certainty while negotiating: interruption
of enforcement measures up to conclusion
of arrangements (4 months)
-Flexibility on the content of the
agreement and by extension of
agreements to dissenting creditors
Spanish Economic Policy & Reforms
Quorum requirement to pass the
draft agreement depends now on the
nature of the measures to be agreed
Designation of the insolvency
administration rests on automatic
process, instead of judicial
appointment
Liquidation phase: more capacities
attached to judges in order to sell a
productive unit, even if the offered
price is lower, as long as future
viability of the firm is ensured
Creation of a list of functions that the
judicial administrator is able to
perform in order to provide more
clarity and legal certainty
Reform Policies 2012-2015
Reform of the insolvency law
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More and updated information on the Spanish economy
For spreadsheets click on ‘Data’
Click here to download all spreadsheets
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Thank you for your attention
Rosa María Sánchez-Yebra Alonso – General Secretary of the Treasury and Financial Policy
[email protected]
José María Fernández Rodriguez – Director General of the Treasury
[email protected]
Pablo de Ramón-Laca – Head of Funding and Debt Management
[email protected]
Leandro Navarro
[email protected]
Julio Poyo-Guerrero
[email protected]
José Miguel Ramos
[email protected]
Teresa Morales
[email protected]
For more information please contact:
Phone: 34 91 209 95 29/30/31/32 - Fax:34 91 209 97 10
Reuters: TESORO
Bloomberg: TESO
Internet: www.tesoro.es
For more information on recent developments:
www.thespanisheconomy.com
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