Quarterly reporton the global and

the Spanish economyQ4 2015

Cí l d E iCírculo de EmpresariosMadrid, January 2016

ENTORNO GLOBAL2

ENTORNO GLOBAL

2016 GDP PREDICTIONSDownward revisions on global growth

UK

Global GDP2015: 3,1% (3,3% previous) 2016: 3,6% (3,8% previous)

USA

UK2.7%

France

Russia‐3.8%Germany

1.6%Germany

1 6%

Russia-0,2%

UK2,2%

Canada1,7%

USA3.1%

Mexico

Spain2.5%

France1.2% China 

6.8%

Japan1%

USA

1,6%

China6,3%

Japan1%

France1,5%

Italy3% Italy

0.5%ASEAN‐55.2%

USA2,8%

SaudiArabia2 2%

Spain2,5%

1,3%

iBrazil‐1% India 

7.5%India7,5%

Mexico2,8%

2,2% Indonesia7,5%Venezuela

-6%

South Africa2%

Australia2.8%Brazil

-1%

Peru3,3%

South AfricaArgentina

3Fuente: FMI, 2015

-1% Africa1,3%

Source: Círculo de Empresarios based on IMF, 2015

Argentina-0,7%

Economic activityReal GDP growth

Global economic growthdeceleration in 2015 and 8

9

Real GDP growth%

Advanced Emerging Global China India

deceleration in 2015 and slightly recovery in 2016

Minor recovery in developed5

6

7

economies

It remains an unevenimprovement path

2,4 2,6 2,42,9

2

3

4

improvement path0

1

2013 2014 2015 2016

Source: Círculo de Empresarios based on IMF, 2015

Emerging markets will markthe 5th consecutive year of

2016 real GDP predictions by areas%

6.4 the 5th consecutive year of declining economic growth2.7 2 2

-0.3

4

EmergingAsia

NorthAmerica

EuropeDevelopedAsia*

LatinAmerica

* Developed Asia includes Japan, South Korea, Singapore, Taiwan, Hong-Kong, Australia and New ZelandSource: Círculo de Empresarios based on IMF, 2015

Risks to global growth

Vulnerabilities in emerging50

60

Recession risks%

Estimation Oct 2015 (Q3 2015-Q2 2016)

Estimation Apr 2015 (Q1 2015 Q4 2015) Vulnerabilities in emergingmarket economies haveincreased, especially in Latin America

20

30

40

50 Estimation Apr 2015 (Q1 2015 - Q4 2015)

0

10

20

USA Eurozone Japan Emerging Asia Latin America

-0.47%

0 11%30

Deflation risks%

E ti ti O t 2015 (Q4 2016) -0.11%

Deflationary pressuresdecrease with the

20

25

30 Estimation Oct 2015 (Q4 2016)

Estimation Apr 2015 (Q2-2016)

decrease with theexception of the Eurozone

5

10

15

Source: IMF, 20155

0USA Eurozone Japan Emerging Asia Latin America

Weakening global tradeGlobal trade

Global merchandise and services exports growthBillion $15

20

25

Annual % change

18000

20000

22000

24000

5

0

5

10

Source: Circulo de Empresarios based on IMF, 2015

12000

14000

16000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

-20

-15

-10

-5

7 7 7 7 8 8 8 8 9 9 9 9 0 0 0 0 2 2 2 2 3 3 3 3 4 4 4 4 5 5 5 Source: Circulo de Empresarios based on IMF, 2015

7%

International exportsQuarterly change %

Q1-

2007

Q2-

2007

Q3-

2007

Q4-

2007

Q1-

2008

Q2-

2008

Q3-

2008

Q4-

2008

Q1-

2009

Q2-

2009

Q3-

2009

Q4-

2009

Q1-

2010

Q2-

2010

Q3-

2010

Q4-

2010

Q1-

2011

Q2-

2011

Q3-

2011

Q4-

2011

Q1-

2012

Q2-

2012

Q3-

2012

Q4-

2012

Q1-

2013

Q2-

2013

Q3-

2013

Q4-

2013

Q1-

2014

Q2-

2014

Q3-

2014

Q4-

2014

Q1-

2015

Q2-

2015

Q3-

2015

Global trade volumesweakened due to emergingmarkets slowdown but slightly-3%

2%

7%

markets slowdown but slightlyrecovery in 2016

-13%

-8%

Canada Germany

Japan USA

Brazil China

G7 BRIICS

BRIICS: Brasil, Rusisa , India, Indonesia, China and South AfricaSource: Circulo de Empresarios based on OECD, 2015

-18%2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2

G7 BRIICS

Commodities: lower oil prices

70

75

Brent price in 2015Dollars

Annual change2014: -48%

% Oil prices marked the second

50

55

60

652015: -34,7% Oil prices marked the second

consecutive year of declining growth

Global inventories increased a net inventory build of 1.72 million barrels per day35

40

45

50

30

350.000

Proved oil reservesmillion barrels

Oil demand and suplymillion barrels 2,5

Global crude inventoriesmillion barrels per day

150.000

200.000

250.000

300.000

100

102

104

Demand0

0,5

1

1,5

2

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015

High stock of 0

50.000

100.000

92

94

96

98Supply Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015

7Source: Círculo de Empresarios based on EIA, 2015

g s oc o proved crude oil

reserves88

90

2012 2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Source: Círculo de Empresarios based on CIA, 2015

Oil prices: dependence and impacts

100

120

Crude dependence on exports of fuel commodities%

Fuel exports as percentage of merchandise exports

Countries with the greatestdependence on oil need to be readyto adjust their public accounts

60

80

Oil rent as percent of GDP

0

20

40

Fiscal and trade consequences of lower oil prices% GDP

The future growth of fuel commodities exporters will dependon their fiscal accounts, currencyreserves and the elasticity of the20

30

40

50 Balance of payments 2013 Balance of payments 2015

Deficit (% GDP) 2013 Deficit (% GDP) 2015

ysupply side

-20

-10

0

10

8Source: Círculo de Empresarios based on Bruegel, 2015Data for 2013

-30

Declining of other commodities

190,00

210,00

Evolución precio materias primas2005=100Commodity price index

The energy componentregistered the largestdeclined90,00

110,00

130,00

150,00

170,00

No energéticas Agríocolas

Metales EnergéticasNon fuel FoodMetals F el declined

50,00

70,00

, Metales Energéticas

S Cí l d i b d 20

Metals Fuel

Source: Círculo de empresarios based on IMF, 2015

Annual change in commodity prices%

The decline of manufacturing activity(especially China) has ledNatural Gas

Wheat

Aluminium

Gold

(especially China) has ledto lower metal prices

West Texas

Zinc

Copper

Natural Gas

9Source: Círculo de empresarios based on GSCI, Bloomberg, EIA, 2015

-50% -45% -40% -35% -30% -25% -20% -15% -10% -5% 0%

Nickel

Economic activity contracted in Latin America

Heterogeneous growthi ff

2,73,2

2,52,4

3,4

2,82 4

3

4

Real GDP%

2015

2016

between areas. Brazil suffersGDP contractions1,4

1,9

,

1,7

2,3

-0 3

1,4

2,

1,5

2,4

0,3

0

1

2

The Pacific Alliance real GDP growth is above 2%

*

-2,5 -2,3

-0,3-0,5

-1,3

-3

-2

-1

ARG BRA CHI COL PAR PER URU Mercosur Pacific Alliance

Latin America

* Pacific Alliance: Chile, Colombia, Peru and MexicoSource: Circulo de Empresarios based on BBVA Research , 2015

Large exchange ratedepreciations broughthigher inflation ratesVenezuela204%

a ce e ca

30

Prices%

higher inflation rates160 %

15,816,8

15

25,6

20

252015 2016

0%

Exchange rates January-December 2015%

,

8,9

4,4 4,43,3 3,2

8,4

15

6,3

3,7 3,5 4,22 8

8,1

5

10

15

-40%

-30%

-20%

-10%

0%

Source: Circulo de Empresarios based on IMF, 2015 Source: Circulo de Empresarios based on Bloomberg, 2015

, 2,8

0Latin America ARG BRA CHI COL PAR PER URU -60%

-50%

ARG BRA COL PAR CHI PER

Brazil: recession and policy uncertainty

Sharp downturn in economic growth8

10

Real GDP, inflation rate and public accounts%

Inflation GDP Deficit (% GDP) Tendency

President Dilma Rousseff’s approval rating declined:

• November 2011: 71%• July 2015: 7,7%-2

0

2

4

6

Dilma Rousseffelected

Inflation rate towards the target for2015 (4,5%).

-10

-8

-6

-4

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Source: Círculo de Empresarios based on IMF, 2015

17155

Exchange rate, Stock Market and 10yr debt1 Jan 2015= 100, %

Brazil’s real depreciated substantially(48% in 2015)

14

15

16

125

135

145Dollar/ Brazilian real

Brazil Stock Market

10yr debt

Financial turbulences (higherfinancing costs and Stock Marketdeclines)

11

12

13

95

105

115

Source: Círculo de Empresarios based on Investing, 2015

1085

China: macroeconomic indicatorsR l GDPReal GDPAnnual % change

Gradual slowdown and 100%

China's sector composition% GDP

Services Industry Agriculture

6,86,3

Gradual slowdown and rebalancing in China

Rise in the share of the30%40%50%60%70%80%90%

2015 2016

Rise in the share of theservice sector0%

10%20%30%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q1-Q3 2015

Source: Círculo de Empresarios based on IMF and BBVA Research, 2015

Private and public debt% GDP

1,8 3,1Still-high debt ratios160,8

163,1Household debt

Corporate debt

36,9 37,942 42,7

Public debt

12Q1 2015 Q2 2015

Source: Círculo de Empresarios based on BIS, 2015

, 37,9

China: external sector and exchange rate

In 2015 foreign exchange6,1

4,6 3,8

3,9

5

10

Current account and currency reserves in China%, trillion $

Currency reserves Exports Imports

Trillion$%

In 2015 foreign- exchangereserves shrank by 483.052 milion $

-2,2

-8,3 -5,5-3,7

-6,9 -6,8

0,5

8 7 3 4

3,5

3,6

3,7

10

-5

0

5

Despite anaccommodativemonetary policy, exports

-17,6

-13,5

-8,1-13,8

-20

-18,8

-8,7

3 0

3,1

3,2

3,3

3,4

25

-20

-15

-10

declinedSource: Círculo de Empresarios based on Reuters and SAFE, 2015

3,0-252014 Q1-2015 Q2-2015 jul-15 aug-15 sep-15 oct-15 nov-15 dec-15

Y t d ll h t

11 August:Yuan devaluation (~2%) to esmitulate

China’s sluggish economy

30 November:China is included in the IMF’s special

drawing rights

2015 interest rates

28-February 5,35%

10-May 5,10%6,4

6,5

6,6

Yuan to dollar exchange rate

27-June 4,85%

25-August 4,60%

23-October 4,35%

3 b 4 3 %

6 January:China’s Central Bank allowed the yuan to depreciate and has been perceived

as a currency war6,1

6,2

6,3

13

31-December 4,35%6

01.0

1.20

1508

.01.

2015

15.0

1.20

1522

.01.

2015

29.0

1.20

1505

.02.

2015

12.0

2.20

1519

.02.

2015

26.0

2.20

1505

.03.

2015

12.0

3.20

1519

.03.

2015

26.0

3.20

1502

.04.

2015

09.0

4.20

1516

.04.

2015

23.0

4.20

1530

.04.

2015

07.0

5.20

1514

.05.

2015

21.0

5.20

1528

.05.

2015

04.0

6.20

1511

.06.

2015

18.0

6.20

1525

.06.

2015

02.0

7.20

1509

.07.

2015

16.0

7.20

1523

.07.

2015

30.0

7.20

1506

.08.

2015

13.0

8.20

1520

.08.

2015

27.0

8.20

1503

.09.

2015

10.0

9.20

1517

.09.

2015

24.0

9.20

1501

.10.

2015

08.1

0.20

1515

.10.

2015

22.1

0.20

1529

.10.

2015

05.1

1.20

1512

.11.

2015

19.1

1.20

1526

.11.

2015

03.1

2.20

1510

.12.

2015

17.1

2.20

1523

.12.

2015

30.1

2.20

1506

.01.

2016

Source: Círculo de Empresarios based on Investing and Reuters ,2015

China: Financial market turbulencesShanghai Composite

6.0007%

Shanghai Composite2014-8 Jan 2016

Period to period chage (left axis)

4 000

5.000

1%

3%

5%Period to period chage (left axis)

Shanghai Composite (right axis)

3.000

4.000

5%

-3%

-1%

January 2016:Under the circ it breaker r les Shanghai

1.000

2.000

-9%

-7%

-5%

Under the circuit breaker rules ShanghaiComposite registered sharp declines

0-13%

-11%

5.01

.201

4

9.01

.201

4

9.02

.201

4

5.03

.201

4

9.03

.201

4

2.04

.201

4

7.04

.201

4

5.05

.201

4

9.05

.201

4

3.06

.201

4

7.06

.201

4

.07.

2014

5.07

.201

4

9.07

.201

4

2.08

.201

4

6.08

.201

4

0.09

.201

4

4.09

.201

4

5.10

.201

4

9.10

.201

4

2.11

.201

4

6.11

.201

4

0.12

.201

4

4.12

.201

4

9.01

.201

5

3.01

.201

5

6.02

.201

5

7.02

.201

5

3.03

.201

5

7.03

.201

5

3.04

.201

5

7.04

.201

5

2.05

.201

5

6.05

.201

5

9.06

.201

5

4.06

.201

5

8.07

.201

5

2.07

.201

5

5.08

.201

5

9.08

.201

5

2.09

.201

5

8.09

.201

5

9.10

.201

5

3.10

.201

5

6.11

.201

5

0.11

.201

5

4.12

.201

5

8.12

.201

5

5.01

.201

6

Yuan devaluation and the introduction of the circuitbreaker* generate volatility shockwaves

China’s Central Bank injects 20 billion $ in order to calm stocks

15 29 19 05 19 02 17 05 19 03 17 01 15 29 12 26 10 24 15 29 12 26 10 24 09 23 06 27 13 27 13 27 12 26 09 24 08 22 05 19 02 18 09 23 06 20 04 18 05

14*The China Securities Regulatory Commission suspends stock circuit breakerSiource: Círculo de Empresarios based on Bloomberg, Investing and Reuters, 2015

Japan: results of “Abenomics” Balance Banco Central de Japón y Nikkei 225Bank of Japan balance sheet and Nikkei 225

18.000

20.000

22.000

340

390

Balance BoJ (eje izq)

a a ce a co Ce a de Japó y e 5billones ¥, puntos

Abenomics

Bank of Japan balance sheet and Nikkei 225

Balance Sheet (left axis)

Nikkei 225 (right axis)

12.000

14.000

16.000

190

240

290 Nikkei 225 (eje dcho)

Since “Abenomics” (Dec-12) Japanese shares haveincreased by 121%

points

Trilli

on¥

6.000

8.000

10.000

40

90

140

y

However6.000

Source: Círculo de Empresarios based on BoJ, Investing, 2015

GDP and inflation rateYoY %

1,8 The Bank of Japandon’t achieve the 2% inflation target0

2

4

6

8

inflation target

-8

-6

-4

-2

0

Real GDP Inflation rate

15Source: Círculo de Empresarios based on OECD, 2015

-10

US: economic growth and labour marketReal GDP

Sustained moderate growthsupported by domestic demand2,7

1 9 1 9 33,8

4,6 4,3 3,924

5

Real GDPYoY, %

GDP Personal cosumption Public expenditureAnnual % change

supported by domestic demand

Consumer spending will remainhealthy during 2016

1,9

0,5 0,1

1,9

1,1

-0,9

2,1

0,6

-2-10123

-5-4-3

Source: Círculo de Empresarios based on Bureau of Economic Analysis, 2015

Payroll employment and rate of unemployment

Strong labour market recoverybut labor force participation still

5,8

5,6

5,7

5 5

5,5

5 3300

350

400

450

5,6

5,8

6Employment (right axis) Unemployment rate (left axis) NAIRU

thou

remains low423

329

201266

119187

260 245 223153 145

298 211

292

5,5 5,55,4

5,3 5,3

5,1 5,15 5

5

50

100

150

200

250

4,8

5

5,2

5,4

%

usand

NAIRU: Non-Accelerating Inflation Rate of UnemploymentSource: Círculo de Empresarios based on Bureau of Labor, 2015

16

04,6

US: monetary policy changes

4,54 254 5

5

US interest rates%

Due to the behavior of...

LABOURMARKET

WAGES

4,25

3,5

33

3,5

4

4,5

16-12-2015First hike since 2006

ECONOMIC GROWTH

CORE INFLATION

2,252

1,5

1

0,51

1,5

2

2,5 First hike since 2006

Source: Círculo de Empresarios based on Federal Reserve, 2015

0,250,5

0

0,5

2008 2015

Positive effects Negative effects

Monetary policy implications

Favourable conditions of economic growthand employment

Lower risks of global deceleration

Higher risk in emerging markets

Diverging monetary policy with the ECB

17

Lower risks of global deceleration

Higher capacity to a reaction in economicpolicy

Higher financing costs

US dollar appreciationChanges in exchange rates, 2015

US dollar appreciatedagainst every

*Chinese yuan

Japanese yen

Suisse franc

g g%

currency*

Emerging marketcurrencies tumbledd i 2015

Canadian dollar

Australian dollar

Euro

Pound

y

during 2015

-60% -50% -40% -30% -20% -10% 0%

Argentina peso

Brazilian real

Russian ruble

Fuente: Bloomberg, 2015

In 2015 the euro depreciated a 9 6%

1,450,03

Euro/dollar 2014-2015

depreciated a 9,6% against the dollar and more than a 20% since reachingmaximums in 2014

1,25

1,3

1,35

1,4

0 01

0

0,01

0,02

odch

ange Eur/ usd

maximums in 2014

Euro volatility rose noticeably

1,05

1,1

1,15

1,2

-0,04

-0,03

-0,02

-0,01

Period to period change (left axis)

Eur/usd (righ axis)

Perio

dto

perio

18* With the exception of the Hong Kong dollar (+0,08%) Source: Círculo de Empresarios based on ECB, 2015

noticeably1-0,05

Europe: GDP, inflation and labour marketR l GDP d i fl ti t

3

4

Real GDP and inflation rateYoY, %

Inflation

GDP

Annual % change

Economic recovery is supported byboth domestic demand and net exports

1,8

1,4 1,3

0,80,7

0,4 0,2 0,2 0,10,3

11,6

0,6

1,10,7 0,8 0,9 1,3

1,6 1,6 1,7 1,8 1,9

1

2

GDP

Lower oil prices have reducedheadline inflation to 0% levels(core inflation stable at 1%)

0,6-0,3

-1,1

-0,40

-2

-1

0

Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 2016 2017

13

EU-28 and EA-19 unemployment rate% of labour force

Despite the recovery of theunemployment ratio, it remains high as Eurostat estimates that 22.159 million11

12

12

13

people were unemployed in the EU-28 of whom 16.924 million were in theeuro area

9

10

10

11

EU-28

EA-19

19Source: Círculo de Empresarios based on Eurostat and European Commission, 2015

8

9

Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 2016 2017

Europe: new monetary policy measures

ECB’S new measures3 of December

Cut thedeposit rate Cut the deposit facility rate by 10

basic points to -0,30% in order to

Extend the

p , %improve monetary policytransmission

MONETARY POLICY

Extend theAsset Purchase

Programme(APP)

Extend theFRFA* Extend the APP until the end of

March 2017 (+360 billion € )

R i t thECB decided to include debtinstruments issued by regional and Broaden the

range of assets

purchased

Reinvest theprincipal

payment onthe securitiespurchased

instruments issued by regional and local governments

20* Fixed Rate and Full Allotment: open market operations at a specified interest rateSource: Círculo de Empresarios based on ECB, 2015

Equity marketsEquity markets 2015%

36,2%

12,7%

10,7%

9,6%

OMX (Denmark)

MIB (Italy)

PSI (Portugal)

Dax (Germany)

9,4%

9,%

8,5%

5 7%

Shanghai (China)

Nikkei (Japan)

CAC 40 (France)

NASDAQ (US) 5,7%

-0,7%

-2,2%

-5,%

NASDAQ (US)

S&P 500 (US)

Dow Jones (US)

FTSE (UK)

-7,2%

-24%

-30% -20% -10% 0% 10% 20% 30% 40%

IBEX 35 (Spain)

ASE (Greece)

Highest returns UE-28• Hungary• Denmark

Lowest returns UE-28• Greece• Poland

Source: Círculo de empresarios based on Bloomberg, 201521

• Ireland • Spain

Europe and emerging Asia vulnerabilitiesCore Europe1= Máx risk; Min risk=0 Emerging Asia

1= Máx risk; Min risk=0GDP (%)

Prices (%)

Unemployment (%)Corruption

Rule of law

0,80,9 GDP (%)

Prices (%)

Unemployment (%)Corruption

Rule of law0,9

1

Structural balance (%)

Dif. Tipo de interés-Crec. PIB 2014-19

Equity (%)

Political stability

0,20,30,40,50,60,7

Unemployment (%)

Structural balance (%)

Interest rate - GDP growth (%)Equity (%)

Political stability

Corruption

0 20,30,40,50,60,70,8

Public debt (% GDP)

Non-residents debt (% GDP)

Financial needs (% GDP)

Credit to deposit (%)

Housing prices (%)0

0,10,2

Public debt (% GDP)

Non-residents debt (% GDP)

Financial needs (% GDP)

Credit to deposit (%)

Housing prices (%)0

0,10,2

-0.47%Financial needs (% GDP)

Financial pressure (% GDP)

External debt (% GDP)

Real Exchange Rate (%)Household credit (% GDP)

Coporate credit (% GDP)

Private credit to GDP (%)

Financial needs (% GDP)

Financial pressure (% GDP)

External debt (% GDP)

Real Exchange Rate (%)Current account deficit (%

Household credit (% GDP)

Coporate credit (% GDP)

Private credit to GDP (%)

Source: Circulo de Empresarios based on BBVA Research , 2015

Main risk: corporate debt Main risks: fiscal and private debt balances are deteriorating

Current account deficit (% GDP)(

GDP)

Europe sovereign ratings Emerging Asia sovereign ratings

AAAAA BBB+ BBB

AA- AA- BBB- BB+Negative

Stable

Perspective

22Germany

AA

France Spain

BBB+ BBB-

Italy SouthKorea

China India Indonesia

BB+Negative

Positive

Source: Circulo de Empresarios based on Standard and Poors, 2015

ENTORNO GLOBAL23

ENTORNO GLOBAL

Obstacles to growth

Deteriorating global growth prospects1Slowdown in emerging economies2 Slowdown in emerging economies

Europe: a setback in the integration process

2Europe: a setback in the integration process, possible Brexit, refugee crisis and islamic

terrorism3Political uncertainty in Spain4Global geopolitical risks5

24

5

Boosts to growth

Stronger growth in advanced economies1Improvement in the labour market2 Improvement in the labour market2Greater confidence of consumers3

Better access to credit4Impact of tax reform5

25

5

Prospects: recovery continues

3.2%

20152.7%

20152016

2.5%2016

2017Source: OECD, November 2015

Lower impact of:

- Euro depreciation

26

Euro depreciation

- Falling oil and raw materials prices

Ajustment in Spain

2008-2011 2012-2015

GDP -4.1% GDP 5.3%

EMPLOYMENT -9.4% EMPLOYMENT 4.1%

DEBT +30.1 pp GDP

DEBT +10.8 pp GDP

EXPORTS 1.2% EXPORTS 3.7%

RISK +239.6 bp RISK -286.4

bp

27Source: Círculo de Empresarios, 2015

GrowthSpain overtakes again the Eurozone and the OECD growth

6

GDP growth%, y/y change Eurozone

OECD

Spain

2

4

Spain

2

0

-4

-2

-62006 Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 2014 Q3 2015 Q3

Source: Círculo de Empresarios based on OECD, 2015

28

GDP components developmentGDP growth (annual % change)Domestic and external demand contribution to annual growth (pp)

4

6 Domestic demand

External demand

GDP

2

-2

0

-4

-8

-6

3Q 2006 2Q 2008 1Q 2010 4Q 2011 3Q 2013 3Q 2015

29

Source: Círculo de Empresarios based on INE and Bank of Spain, 2015

Composition of growth

Predictions 2015: GDP annual growth = 3.2%

3 6 pp3 6 pp0.4 pp0.4 pp

3.6 pp3.6 ppcontribution to growth

contribution to growth

• Private consumption = 3.1%

• Public consumption = 2.3%• Exports = 5.9%

pppp g

• GFCF = 6.3%• Imports = 7.7%

External demand

Domestic demand

30Source: Círculo de Empresarios based on FUNCAS and Bank of Spain (December 2015)

Domestic demand: consumption

Household consumption growthHousehold consumption growth2013-14

0.7%1.3%

-0.8%

10% richest Middle class 40% poorest

Source: Círculo de Empresarios based on BBVA, 2015Source: Círculo de Empresarios based on BBVA, 2015

31

Consumption recovers on a varied way

Sectorial contribution to growth

Gross value added growth 2008-20152010=100

120

130

Services lead recovery

100

110

120

Industry and buildingsector return topositive growth rates80

90

100

p g

60

70

80

60

2015

Q3

2015

Q2

2015

Q1

2014

Q4

2014

Q3

2014

Q2

2014

Q1

2013

Q4

2013

Q3

2013

Q2

2013

Q1

2012

Q4

2012

Q3

2012

Q2

2012

Q1

2011

Q4

2011

Q3

2011

Q2

2011

Q1

2010

Q4

2010

Q3

2010

Q2

2010

Q1

2009

Q4

2009

Q3

2009

Q2

2009

Q1

2008

Q4

2008

Q3

2008

Q2

2008

Q1

Agriculture GVA Services GVA GDP Industry GVA Building GVA

32

Agriculture GVA Services GVA GDP Industry GVA Building GVA

Source: Cículo de Empresarios based on INE 2015

Prices: low inflation continues

6 0Energy products (Spain)

CPI compositionpp, annual % change

4,0

5,0

6,0 Non processed foods (Spain)

Core inflation (Spain)

Spain CPI (annual % change)

Eurozone CPI (annual % change)

2,0

3,0

4,0

0,0

1,0

‐2,0

‐1,0

10601080208030052070209041060108

S i i t i it titi ith i fl ti t

2015M1

2015M0

2015M0

2014M0

2014M0

2013M0

2013M0

2012M1

2012M0

2011M1

2011M0

2011M0

2010M0

2010M0

2009M1

2009M0

2009M0

2008M0

Source: Círculo de Empresarios based on INE, 2015

33

Spain maintains its competitiveness with an inflation ratebelow Eurozone average

Labour market (I)

ULC growth2010=100

0

110

115

Germany

95

100

105OECD

UK

85

90

Spain

75

80

Whil G d th UK h i th i it l b t (ULC)

Source: OECD, 2015

34

While Germany and the UK have risen their unit labour costs (ULC), Spain has mantained them

Labour market (II)

Evolution of affiliation to Social Security and registered unemployment

6 000 00020 000 000

unemploymentPersons

Affiliates Unemployed

Since 2013 Q2, Spain and Germanyhave contributed to 2/3 of employment creation in the Eurozone:

5.000.000

6.000.000

19.000.000

19.500.000

20.000.000

• Spain: +724,000 employments(15% of pre-crisis employment level)

• Germany: + 592 000 employments

3.000.000

4.000.000

17 500 000

18.000.000

18.500.000

Affi

liate

s Unemployed

• Germany: + 592,000 employments(5% of pre-crisis employment level)

1.000.000

2.000.000

16.500.000

17.000.000

17.500.000d

016.000.0002007 2008 2009 2010 2011 2012 2013 2014 Nov

2015

S Cí l d E i b d Mi i t f E l t d S i l S it D 2015

35

Source: Círculo de Empresarios based on Ministry of Employement and Social Security, Dec. 2015

Labour market (III)

2421.4

17 420

25

Temporary employment, 2014% of dependent employment

Temporary contracts = 24% of total (vs. EU 28 average = 14.2%)

17.415.8 15.6

14.2 13.6 13.3 1311.7 11.1

9.3

6.410

15

0

5

Spa

in

Portu

ga

l

Swed

en

Fra

nce

Finl

and UE

Italy

Ca

nad

a

Ger

ma

ny

Gre

ece

OEC

D

Irela

nd UK

C G

Source: OECD, 2015

33.434

34

Evolution of temporary rate in Spain % of dependent employment

Temporary rate has been reducedfrom 34% in 2006 to 24% in 2014

32.2 32.2 32 31.932.5

33.4

31.6

29.130

32

from 34% in 2006 to 24% in 2014

25.224.7

25.1

23.4 23.1

2424

26

28

36

23.1

222000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: OECD, 2015

Development of debt

Debt: PPAAs, non-financial corporations and householdsMillions of euro

TOTAL(October 2015)

246 4% f GDP

1.200.000

1.400.000 Public Non-financial corporations Households

246.4% of GDP

600 000

800.000

1.000.000

200.000

400.000

600.000 Public96.2

Non-financial

corporations

Households66.3

0

Oct

08

Jan

09A

pr 0

9Ju

l 09

Oct

09

Jan

10A

pr 1

0Ju

l 10

Oct

10

Jan

11A

pr 1

1Ju

l 11

Oct

11

Jan

12A

pr 1

2Ju

l 12

Oct

12

Jan

13A

pr 1

3Ju

l 13

Oct

13

Jan

14A

pr 1

4Ju

l 14

Oct

14

Jan

15A

pr 1

5Ju

l 15

Oct

15

84.3

Source: Círculo de Empresarios based on Bank of Spain, 2015

37

In absolute terms, public debt ratios keep on growing and private deleveraging continues

External sector

January - October 2015 (annual % change)Geographic distribution (%)

OTHER

Exports

▲ 3.2% (228,960.7 M€)Imports

▲ 3.8% (208,430.4 M€)

xpor

ts

EU

Rest of Europe 5.7%

64.8%

ASIA9 5

AMERICA11.2

AFRICA6.5

2.3

Trade balance ▼2.7% in DEFICIT (20,530.3 M€)

▼ 31.3% in energy deficit, because of lower energy prices

Ex

EUROPE70.5

9.5

SECTORS: TOP 3

EU 55.5%China

8 6% OTHER

mpo

rts

Rest of Europe

5.4%

8.6%Exports % / total Imports % / total

Capital assets 19.9 Capital assets 19.9

Automobile 16.9 Chemistry 16.1

AMERICA10.8

AFRICA8.9

0.4

Iy

Food, beverage and tobacco

15.9 Energy 14.5

EUROPE60.9ASIA

19

38

Source: Círculo de Empresarios based on Ministry of Economy and Competitiveness, December 2015

Exports by regional administrations

Merchandise exports% of national merchandise exports

Asturias1 6%

Cantabria0.9%

Basque CNavarre

3 4%Galicia

7.6%

1.6% Basque C.8.8%

La Rioja0.7%

3.4%

AragonCatalonia

25.6%Castile and Leon

5.9% Aragon4.3%

Balearic Islands0.4%Madrid

11.3%

Valencian C.11.2%Extremadura

0.7% Castile-La Mancha2.4%

Murcia3.7%

Andalusia10%

%

> 15%10%

Canary Islands0.9%

5 -9%

< 5%

> 15%

10 - 15%

39Source: Círculo de Empresarios based on DATACOMEX, 2015

Risk premium

Development of Spanish and Italian risk premiumReferred to 10 years German bond yield

500

600Spain Italy

300

400

100

200

0

100

Source: Círculo de Empresarios based on ECB and Bank of Spain, 2015

40

Spain´s position in international rankings

Doing Business 2016 The Global Innovation Index 2015

Global Entrepreneuship Index 2016

Singapore

N. Zeland

1

2

US

Canada

1

2

Switzerland

UK

1

2

Denmark

SPAIN

3

33

Australia

SPAIN

3

32

Sweden

SPAIN

3

27SPAIN33 SPAIN32 SPAIN27Source: World Bank, 2015 Source: GEDI, 2015 Source: Johnson Cornell Univ., INSEAD and WIPO, 2015

The Global Competitiveness Index 2015 2016

International Tax Competitiveness Index 2015

Switzerland

Singapore

1

2

Estonia

N Zeland

1

2

Index 2015-2016 Competitiveness Index 2015

Singapore

US

2

3

N. Zeland

Switzerland

2

3

41

SPAIN33 SPAIN29Source: WEF, 2015 Source: Tax Foundation, 2015

www.circulodeempresarios.orgp g