Global and Spanish Outlook 3T14
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Transcript of Global and Spanish Outlook 3T14
Third quarter 2014
Global and Spain Outlook
Global and Spain Economic Outlook / Third quarter
Takeaways
Page 2
1
2
3
Global growth will continue, although the recovery is slower than others in the
past
The likelihood of a hard landing in China is low and the Fed is handling the recovery
well, but the geopolitical risks and probability of lower activity in the EMU are
increasing
In Spain, growth is moderating in 3Q14 and will accelerate again in 2015, due to
more expansive monetary and fiscal policies, although with risks around the
composition of growth and the current account
The reforms are having a positive effect on the economy. However, more effort
can and should be put into making the recovery more intense, sustainable and long-
lasting
4
Global and Spain Economic Outlook / Third quarter
Page 3
Section 1
The global economic recovery will continue in a complex environment of more asymmetric risks
Section 2
Spain: the recovery will accelerate in 2015 but with risks of a less balanced composition
Section 3
It is crucial to continue with the reform effort
Index
Global and Spain Economic Outlook / Third quarter
Section 1
Geopolitical risks have not raised financial stress globally…
Page 4
BBVA Research financial stress index Source: BBVA Research
BBVA Research map of financial tensions Source: BBVA Research
Czech Republic
Hungary
Poland
Russia
Turkey
USA
Sep-1
4
EMU
LatAm
Asia
Eastern Europe
Jun-1
4
Jul-14
Aug-1
4
Very high Low
Jan-1
4
Feb-1
4
Mar-
14
Apr-
14
May-1
4
High Very low
Neutral Not available
-0.10
-0.08
-0.06
-0.04
-0.02
0.00
0.02
0.04
0.06
-0.7
-0.4
-0.1
0.2
0.5
0.8
1.1
1.4
1.7
Dec-1
1
Ma
r-1
2
Jun-1
2
Sep
-12
Dec-1
2
Ma
r-1
3
Jun-1
3
Sep
-13
Dec-1
3
Ma
r-1
4
Jun-1
4
Sep
-14
Developed Emerging (rhs)
Global and Spain Economic Outlook / Third quarter
Section 1
… nor have they aborted, at least until June at any rate, the ongoing recovery of global trade
Page 5
Goods trade in emerging economies, export volumes, % QoQ Source: BBVA Research based on CPB
-2.5
0.0
2.5
5.0
Jun-1
0
Dec-1
0
Jun-1
1
Dec-1
1
Jun-1
2
Dec-1
2
Jun-1
3
Dec-1
3
Jun-1
4
Emerging Eastern Europe Africa & Middle East
46
48
50
52
54
56
58
60
62
-1.5
0
1.5
3
4.5
Jun-1
0
Dec-1
0
Jun-1
1
Dec-1
1
Jun-1
2
Dec-1
2
Jun-1
3
Dec-1
3
Jun-1
4
Exports PMI (rhs)
Merchandise world trade and PMI (export volumes, QoQ %; new export orders) Source: CPB, JPMorgan and BBVA Research
Global and Spain Economic Outlook / Third quarter
Section 1
… a necessary condition for maintaining favourable growth outlooks
Page 6
Manufacturing confidence and financial volatility indicators are consistent with continued improvement in world GDP
growth
Global growth based on BBVA-GAIN (QoQ %) Source: BBVA Research
0.0
0.2
0.4
0.6
0.8
1.0Ju
l-1
4
Cu
rren
t E
st
Ju
l-1
4
Cu
rre
nt
Est
3Q13 4Q13 1Q14 2Q14 3Q14
Current Forecast
Global and Spain Economic Outlook / Third quarter
Page 7
China: confidence and manufacturing activity Source: Haver Analytics and BBVA Research
Section 1
Some risks are melting away: China …
External demand and the support of fiscal and monetary policy measures drive the short-term
outlook in China
The reforms put in place (financial sector and investment promotion) ought to reduce the risk
of a hard landing
The government will continue to take supportive measures, even though it is not managing to
reduce the dependence on credit
3.0
6.0
9.0
12.0
15.0
18.0
21.0
36
40
44
48
52
56
60
Dec-0
6
Sep
-07
Jun-0
8
Ma
r-0
9
Dec-0
9
Sep
-10
Jun-1
1
Ma
r-1
2
Dec-1
2
Sep
-13
Jun-1
4
PMI GVA (rhs)
Global and Spain Economic Outlook / Third quarter
Page 8
Section 1
Some risks are melting away: USA …
In the US, the GDP fall in 1Q14 was due mainly to transitory factors
The economy is expected to grow 2.0% in 2014 and 2.5% in 2015
US Weekly activity index (% week on week) Source: BBVA Research
-2.5
0.0
2.5
5.0
7.5
10.0
24
Ma
y-1
3
5 J
ul-13
16
Au
g-1
3
27
Se
p-1
3
8 N
ov-1
3
20
Dec-1
3
31
Jan-1
4
14
Ma
r-14
25
Ap
r-1
4
6 J
un-1
4
18
Jul-14
29
Au
g-1
4
Global and Spain Economic Outlook / Third quarter
Page 9
US: monetary policy rate (%) Source: BBVA Research and Federal Reserve
Section 1
… but others remain: the global impact of monetary tightening on the horizon in the USA
The Fed’s balance sheet expansion is ending in October 2014 and rate hikes may be in store by
mid-2015
The pace will be determined by the improvement in the labour market and
economic activity in general
The Fed’s communications policy on its exit strategy will be increasingly important
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.75
Jul-1
4
Oct-
14
Jan-1
5
Apr-
15
Jul-1
5
Oct-
15
Jan-1
6
Apr-
16
Jul-1
6
Oct-
16
BBVA forecast Fed funds
Implicit rate (Aug-14) Implicit rate (Sep-14)
Global and Spain Economic Outlook / Third quarter
Page 10
EMU: unemployment and inflation (%) Source: BBVA Research
Section 1
…and others harden: activity and disinflation in the EMU
Recovery in the EMU ought to continue, underpinned by the improvement in the external
environment and a favourable policy mix
However, there is a growing risk of unanchoring inflation expectations…
… which could make recovery more difficult in highly indebted countries which need to gain
competitiveness
AT
DE
LU FI
EE
BE
SI
MT
NL
FR
IT
LT IE
PT
SK ES
EL
CY
EMU (EQ)
Inflation expectations
0.6%
EMU (August)
-1,5
-1,0
-0,5
0,0
0,5
1,0
1,5
2,0
5 10 15 20 25 30
Infl
ati
on
, Ju
ly 2
014,
Yo
Y (
%)
Unemployment rate, July 2014 (%)
0.5/4
Global and Spain Economic Outlook / Third quarter
Page 11
Eurozone: impact on growth and inflation of credit increase as a result of TLTRO (pp) Source: BBVA Research
• Negative deposit rate
• LTROs to be extended
• TLTRO
• No sterilisation of open-market operations
• Announcement that additional measures are being analysed: ABS purchases and quantitative easing
ECB measures
The measures strengthen the ECB’s guidelines on interest rates and monetary
policy transmission mechanisms
Section 1
… and others harden: activity and disinflation in the EMU
Recent activity data on activity and prices,
together with Draghi’s speech, confirm that
risks continue to the downside
0.0
0.1
0.2
0.3
0.4
0.5
0.6
GDP INF GDP INF
Avge. Impact per annum 2014-15 Avge. Impact per annum 2014-16
TLTRO Stock TLTRO Flow
Partial pass-through Full pass-through
Global and Spain Economic Outlook / Third quarter
Page 12
Section 1
In any event, the pace of economic recovery is relatively slow
US, comparison of economic recoveries GDP per capita Source: BBVA Research
US, comparison of economic recoveries GDP growth per capita Source: BBVA Research
Recessions in US: 1954, 1974, 1980, 1991, 2001, 2008
94
96
98
100
102
104
106
108
110
112
t-1 t t+1 t+2 t+3 t+4 t+5 t+6
average from 1954-2001 recoveries 2008
0.00
0.50
1.00
1.50
2.00
2.50
2009-14 2010-14
Current recovery
Average from 1954-2001
Average, less one standard deviation
Global and Spain Economic Outlook / Third quarter
Page 13
Deleveraging in the private sector is happening slowly and total debt (public + private) is still
high
The adjustment of agents’ balance sheets, still pending, could put a brake on recovery in the
medium term
US: potential growth, real rates of interest and total debt Source: BBVA Research
Section 1
In any event, the pace of economic recovery is relatively slow
0
1
2
3
4
5
6
60
110
160
210
260
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
US total debt, public and non-financial private sector, % GDP
Potential growth (rhs)
10-year real yield; 3-year centered moving average (rhs)
Global and Spain Economic Outlook / Third quarter
Page 14
1
2
GDP global growth (%) Source: BBVA Research
Global growth will continue with improvements in developed economies, the US and the eurozone, but we can expect a gentle slowdown in China
The risk of a hard landing is small and the Fed is keeping financial volatility anchored, but geopolitical risks are arising, and activity risks in the EMU
The adjustment of agents’ balances, still pending, may put a brake on the recovery in the medium term
3
Section 1
Snapshot
2.8
-0.4
5.2
4.0
3.23.0
3.3
3.8
-2
-1
0
1
2
3
4
5
6
2008 2009 2010 2011 2012 2013 2014 (f) 2015 (f)
Developed Emerging Baseline Jul-14
Global and Spain Economic Outlook / Third quarter
Page 15
Section 1
The global economic recovery will continue in a complex environment of more asymmetric risks
Section 2
Spain: the recovery will accelerate in 2015 but with risks of a less balanced composition
Section 3
It is crucial to continue with the reform effort
Index
Global and Spain Economic Outlook / Third quarter
Section 2
Growth forecasts have been revised to the upside
There is growing consensus about the improving growth outlook for the Spanish
economy
We have revised our GDP growth forecast upwards, to 1.3% in 2014 and 2.3% in 2015
The improvement represents an aggregate 0.6pp in 2014 and 2015
Page 16
Spain: growth forecasts for 2014 (%) Source: BBVA Research based on Consensus Forecasts
-0.2
-0.1
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Fe
b-1
3
Ma
r-1
3
Apr-
13
Ma
y-13
Jun-1
3
Jul-1
3
Aug
-13
Sep
-13
Oct-
13
Nov-1
3
Dec-1
3
Jan-1
4
Fe
b-1
4
Ma
r-1
4
Apr-
14
Ma
y-14
Jun-1
4
Jul-1
4
Aug
-14
Consensus (1,2%) National Forecasters (1,2%)
Foreign Forecasters (1,1%) BBVA Reseaech (1,3%)
Global and Spain Economic Outlook / Third quarter
Section 2
Expansion stretches into the third quarter …
In 2Q14, GDP grew for the fourth consecutive quarter …
… thanks to increased domestic demand, particularly private, and despite the stagnation
in net exports
The trend in the 3Q14 figures is towards a moderation in the expansion rate, to 0.4% or
0.5%
Page 17
Spain: GDP growth and MICA-BBVA forecasts Source: BBVA Research
-1,5
-1,0
-0,5
0,0
0,5
1,0
-1,5
-1,0
-0,5
0,0
0,5
1,0
jun
-09
sep-0
9
dic
-09
ma
r-1
0
jun
-10
sep-1
0
dic
-10
ma
r-1
1
jun
-11
sep-1
1
dic
-11
ma
r-1
2
jun
-12
sep-1
2
dic
-12
ma
r-1
3
jun
-13
sep-1
3
dic
-13
ma
r-1
4
jun
-14
sep-1
4 (
e)
IC al 60% IC al 40% IC al 20% PIB (%t/t)
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2Q
09
3Q
09
4Q
09
1Q
10
2Q
10
3Q
10
4Q
10
1Q
11
2Q
11
3Q
11
4Q
11
1Q
12
2Q
12
3Q
12
4Q
12
1Q
13
2Q
13
3Q
13
4Q
13
1Q
14
2Q
14
3Q
14
(f)
CI at 60% CI at 40%
CI at 20% GDP (%QoQ)
Global and Spain Economic Outlook / Third quarter
Better fundamentals, less uncertainty, some fiscal stimuli and more credit account for the
increase in private consumption
Investment in machinery and equipment has grown for six quarters in a row …
… while the economy is moving closer to reaching the public deficit target
Page 18
Section 2
… supported by domestic demand
Spain: effect of the PIVE vehicle purchase incentive programme on private consumption (quarterly growth rate, pp) Source: BBVA Research
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14
Over the quarterly growth rate Cumulative effect
PIVE comes into effect:Oct-12
Global and Spain Economic Outlook / Third quarter
Section 2
2015: crucial that exports grow
Domestic demand’s contribution will tend to fall in the next few quarters …
… therefore, to sustain growth, it is crucial that exports recover
The recovery in external demand and a more depreciated real exchange rate will support
growth in the short term
Page 19
Spain: additional exports growth in 2015 due to
changes in fundamentals (pp) Source: BBVA Research
0,0
0,5
1,0
1,5
2,0
2,5
Mayor crecimiento mundial Mejora TCERGreater world growth Improvement in TCER
Global and Spain Economic Outlook / Third quarter
Section 2
2015: investment in M&E set to grow faster
Page 20
Spain: investment in machinery and equipment (M&E) (Real ratios at 2008 prices) Source: BBVA Research based on INE
While investment in M&E has grown 8.0% in Europe since bottoming out in 2Q09, in Spain it
has leapt 22.6%
Today it makes up 45% of total real investment and over 8% of real domestic demand
(record high) …
… which is consistent with the change in the productive model, directed towards the external
sector 4
5
6
7
8
9
10
Dec-8
1
Dec-8
3
Dec-8
5
Dec-8
7
Dec-8
9
Dec-9
1
Dec-9
3
Dec-9
5
Dec-9
7
Dec-9
9
Dec-0
1
Dec-0
3
Dec-0
5
Dec-0
7
Dec-0
9
Dec-1
1
Dec-1
3
Dec-1
5
% of GDP % of national demand
Global and Spain Economic Outlook / Third quarter
Section 2
2015: more expansive monetary policy
Page 21
Spain: estimated impact on private sector credit, excluding mortgages (accumulated difference vs. latest forecasts in EUR bn) Source: Eurostat and BBVA Research
The ECB’s actions are designed to reduce the cost of bank funding, conditional on an increase
in credit
In Spain, lower rates will increase credit demand …
… by as much as another EUR50bn (when compared with a scenario of no policy changes) if our forecasts of lower differentials on interest
rates are confirmed 0
10
20
30
40
50
60
1st year 2nd year 3th year 4th year 5th year
Lower risk-free rates
Lower risk-free rates + lower differential rate
Global and Spain Economic Outlook / Third quarter
Page 22
Simplicity
Transparency
Efficiency
Neutrality
Progressiveness
• Moves such as reducing the number of tax brackets, reducing direct taxation and steps towards greater neutrality in saving instruments are welcomed
• Nevertheless, too many deductions remain in place and the system is still complex and opaque
• There is still a lot of room for improvement in incentivising growth and the change in the productive model
Section 2
2015: a more expansive fiscal policy
Global and Spain Economic Outlook / Third quarter
In total, the tax cut will reduce revenue by
EUR9bn between 2015 and 2016 …
… which will increase internal demand, and
with it imports, thus softening the impact on
GDP
The cyclical improvement in revenue and
expenses, together with meeting 2014 targets,
makes the fiscal impulse easier
Section 2
2015: a more expansive fiscal policy
Page 23
Spain: impact of the tax cut on income tax (IRPF) and corporation tax (IS) (deviation from a scenario without reform, pp) Source: BBVA Research
0,0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
1,0
2014 2015 2016 2017
GDP Private consumption Imports
Global and Spain Economic Outlook / Third quarter
Lowered financial stress and the better position in the cycle have impacted on economic agents’
expectations
who have modified their consumption, investment and savings decisions
slowing the rate of correction of external imbalances
Section 2
Domestic risks: adjusting the current account
Page 24
Spain: current account balance forecasts for 2014 (EUR bn) Source: BBVA Research based on consensus forecasts
0
5
10
15
20
25
Fe
b-1
3
Ma
r-1
3
Apr-
13
Ma
y-13
Jun-1
3
Jul-1
3
Aug
-13
Sep
-13
Oct-
13
Nov-1
3
Dec-1
3
Jan-1
4
Fe
b-1
4
Ma
r-1
4
Apr-
14
Ma
y-14
Jun-1
4
Jul-1
4
Aug
-14
Market consensus BBVA Research
Global and Spain Economic Outlook / Third quarter
Although significant progress has been made in improving competitiveness and exports …
… with more employment creation, there has been a deterioration in the current account
balance …
… that must be avoided in the medium- and long-term by forging ahead with the reforms
Section 2
Domestic risks: adjusting the current account
Page 25
Spain: Current account and unemployment rate (% of GDP and %) Source: BBVA Research
-15
-10
-5
0
5
10
5
10
15
20
25
30
Jun-9
0Jun-9
1Jun-9
2Jun-9
3Jun-9
4Jun-9
5Jun-9
6Jun-9
7Jun-9
8Jun-9
9Jun-0
0Jun-0
1Jun-0
2Jun-0
3Jun-0
4Jun-0
5Jun-0
6Jun-0
7Jun-0
8Jun-0
9Jun-1
0Jun-1
1Jun-1
2Jun-1
3Jun-1
4
Cu
rren
t a
cco
un
t b
ala
nce (
%)
Un
em
plo
ym
en
t ra
te (
%)
Unemployment rate
Current account
balance (rhs)
Unemployment rate
compatible with
foreign balance
Global and Spain Economic Outlook / Third quarter
Section 2
Macroeconomic Forecasts
Page 26
Spain and Europe: macroeconomic forecasts Source: BBVA Research based on INE and Eurostat
Spain EMU Spain EMU Spain EMU Spain EMU
Households final consumption expenditure -2,8 -1,4 -2,1 -0,6 1,9 0,7 2,0 1,4
General government final consumption exp. -4,8 -0,6 -2,3 0,1 0,1 0,4 0,6 0,7
Gross fixed capital formation (G.F.C.F.) -7,0 -3,8 -5,1 -2,8 1,2 2,5 4,9 4,6
Equipment and machinery -3,9 -4,3 2,2 -1,9 8,5 3,3 7,3 6,4
Housing -8,7 -3,3 -8,0 -3,4 -3,5 1,7 4,9 3,3
Other constructions -10,6 -4,7 -10,9 -4,1 -4,9 0,9 1,1 2,5
Changes in inventories (*) 0,0 -0,5 0,0 0,0 0,0 0,0 0,0 0,0
Domestic Demand (*) -4,1 -2,1 -2,7 -0,9 1,4 1,0 2,2 1,7
Exports 2,1 2,7 4,9 1,5 4,7 3,0 6,5 4,6
Imports -5,7 -0,8 0,4 0,4 5,1 3,2 6,4 4,6
External Demand (*) 2,5 1,5 1,5 0,5 0,0 0,1 0,2 0,2
GDP mp -1,6 -0,6 -1,2 -0,4 1,3 1,1 2,3 1,9
Pro-memoria
GDP excluding housing -1,2 -0,5 -0,9 -0,2 1,6 1,0 2,2 1,9
GDP excluding contruction -0,4 -0,2 -0,1 0,0 2,0 1,0 2,3 1,8
Total employment (LFS) -4,3 -0,7 -2,8 -0,8 1,0 0,5 2,1 0,8
Unemployment rate (% Active pop.) 24,8 11,3 26,1 12,0 24,5 11,7 23,1 11,4
Current account balance (% GDP) -1,2 1,2 0,8 2,3 0,3 2,2 1,1 2,1
Public debt (% GDP) (**) 86,0 93,0 93,9 95,2 99,8 95,9 101,3 95,5
Public deficit (% GDP) -6,8 -3,7 -6,6 -3,0 -5,5 -2,6 -4,5 -2,1
CPI (average) 2,4 2,5 1,4 1,4 0,1 0,6 0,9 1,1
CPI (end of period) 2,9 2,3 0,3 0,8 0,4 0,7 1,2 1,2(*) Contribution to GDP Growth
(f): forecast
(**) Excluding aid to the banking sector in Spain
2012(% YoY)
2013 2014 (f) 2015 (f)
Global and Spain Economic Outlook / Third quarter
Our growth forecasts for the autonomous communities remain heterogeneous
Differing levels of exposure to external demand …
Section 2
Forecasts by autonomous communities
Page 27
… and progress made in the fiscal consolidation process are still the main factors
accounting for the differentials in growth
GDP growth by AC Source: BBVA Research based on national statistics institute (INE)
AND
ARA
AST
BAL
CAN
CNT
C&L
CLM
CAT
EXT
GAL
MAD
MUR NAV
BASQ
RIO
VAL
SPA
1,50
1,75
2,00
2,25
2,50
2,75
3,00
0,50 0,75 1,00 1,25 1,50 1,75 2,00
GD
P g
row
th in
201
5
GDP growth in 2014
Global and Spain Economic Outlook / Third quarter
Page 28
Section 1
The global economic recovery will continue in a complex environment of more asymmetric risks
Section 2
Spain: the recovery will accelerate in 2015 but with risks of a less balanced composition
Section 3
It is crucial to continue with the reform effort
Index
Global and Spain Economic Outlook / Third quarter
Section 3
The outlook for the labour market looks brighter …
Page 29
Spain: employment and unemployment rate Source: BBVA Research based on INE
Growth and greater labour market efficiency will
contribute to increasing employment in the
private sector, reducing the unemployment rate
Employment figures revised upwards: 2014: 170k (45k forecast in May) 2015: 360k (235k forecast in May)
… and the unemployment rate downwards: 2014: 24.5% (25.1% forecast in May) 2015: 23.1% (24.2% forecast in May) 08
11
14
17
20
23
26
29
-1500
-1200
-900
-600
-300
0
300
600
2008 2009 2010 2011 2012 2013 2014 2015
Unemployment rate (% active pop, rhs)
Employment (‘000s of people, lhs)
Global and Spain Economic Outlook / Third quarter
Section 3
… but the imbalances are still weighty
Page 30
Progress
Designed for a group that has been hit particularly hard by the crisis
It tries to improve young people’s employability and stop the current unfavourable circumstances having permanent repercussions on their working lives
It will combine multiple “activation” strategies (tax relief for employers, training, public-private cooperation, etc.) supported by a personalised roadmap
Limitations
The budget (EUR2.4bn) is significantly lower than that allocated by the countries where the Youth Guarantee is already in place and less than the ILO recommendation
Progress in the dualisation of the training system would be desirable, as in the introduction of professional career programmes and job search advice
For this reason, we welcome the introduction of the National Youth Guarantee Scheme
Global and Spain Economic Outlook / Third quarter
Spain: unemployment rate and Public Administrations’ deficits Source: BBVA Research
It does not endanger the prospect of meeting the public deficit target in the next two years …
… but neither does it make structural changes in the system. The budget balance will only be
corrected by the better position in the cycle
Thus, uncertainty continues about the necessary process of reducing public debt in
the medium term
Section 3
The tax reform: progress, but with room for improvement (1)
Page 31
80
81
82
83 84
85
86
87 88 89
90 91 92
93 94
95
96
97
98
99 00 01 02 03 04
05
06 07
08
09
10 11
12 13
14
15
16
17
-12
-10
-8
-6
-4
-2
0
2
4
7 9 11 13 15 17 19 21 23 25 27
Budget
bala
nce (
% G
DP
)
Unemployment rate (%)*
14%
(2006)
18%
(2013)
Global and Spain Economic Outlook / Third quarter
EU15: Unemployment rate and social security payments, divided by indirect taxes Source: BBVA Research based on Boscá, Doménech and Ferri (2013)
Greater distribution of the tax burden, from direct to indirect taxation, would be desirable
The evidence shows that if social security contributions were reduced relative to indirect
taxes …
… the impact on employment and growth would be greater, as well as contributing to an
improvement in the CA and reducing income inequality
Section 3
The tax reform: progress, but with room for improvement (2)
Page 32
BE
DK
DE IE
EL
ES
FR IT
LU NL
AT
PT
FI SE
UK
y = 9,0157x - 0,4185 R² = 0,644
4
7
10
13
16
19
0,5 0,7 0,9 1,1 1,3 1,5 1,7
Unem
plo
yment
rate
(%
), 2
007
- Jan.2
014
Social Security contributions/Indirect taxation, 2011
Global and Spain Economic Outlook / Third quarter
Section 3
The need to dig deeply with the reforms
1. Reduce debt, improve the Spanish economy’s lending capacity and attract foreign direct investment
3. Reforms which help to improve productivity, the size of companies, competitiveness and Spain’s capacity to attract physical, human and
technological capital from abroad
4. Going further with reforms which improve the efficacy of active employment policies, reduce the two-tier reality of the labour market and improve how it
works -> more employment, and of higher quality
2. The Public Administrations Reform, fiscal consolidation and long-term sustainability of public finances, with an efficient fiscal system which incentivises
growth and job creation -> report by the Steering Committee
Page 33
Global and Spain Economic Outlook / Third quarter
Takeaways
Page 34
1
2
3
Global growth will continue, although the recovery is slower than others in the past
The likelihood of a hard landing in China is low and the Fed is handling the recovery
well, but the geopolitical risks and probability of lower activity in the EMU are
increasing
In Spain, growth in Spain is moderating in 3Q14 and will accelerate again in 2015,
due to more expansive monetary and fiscal policies, although with risks around the
composition of growth and the current account
The reforms are having a positive effect on the economy. However, more effort can
and should be put in to make the recovery more intense, sustainable and long-lasting 4
Third quarter 2014
Global and Spain Outlook