crisi - conde ruiz
TRANSCRIPT
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SPANISH ECONOMY: FINANCIAL CRISIS AND POLICY RESPONSES
PR09OEP012
J. Ignacio Conde Ruiz
Director, Department of Economic Policy
Economic Bureau of the Prime Minister
Giornate di Studio nFA 2009
http://www.noisefromamerika.org/index.php/articoli/Giornate_di_Studio_nFA_2009 -
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The Spanish economy experienced 14 consecutive years of positive growth, which haveallowed it to converge with Europe in per capita terms.
1994-2008: Convergence with Europe
Convergence with Italy in GDP per capita(ppp) terms.
Convergence with the EU25 in GDP per capita(ppp) terms.
Spain/Italy
GDP per
inhabitant
Productivity
/ hour
Hours / total
employment
Employment
rate
Demographic
factor (*)
2000 83,3 88,5 91,3 101,9 101,2
2005 97,3 99,5 91,4 103,1 103,8
2007 103,4 106,1 89,4 104,5 104,4
(*) Population aged 15-64 / Total population.
GDP -volumes
-1
0
1
2
3
4
5
6
III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
QoQ YoY
Spain/EU25
GDP per
inhabitant
Productivity
/ hour
Hours / total
employment
Employment
rate
Demographic
factor (*)
2000 92,7 98,4 100,2 93,9 100,3
2005 97,9 97,5 99,6 99,8 101,1
2007 101,6 101,7 97,9 100,1 102,1
(*) Population aged 15-64 / Total population.
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Housing investment in Spain, as%GDP (1996-2008) Housing starts in Spain
An Over-sized residential construction sector
The decline in the housing sector started in 2006. The international financial crisis turned
into a more severe process what could have been a smooth adjustment.
3,0
3,5
4,0
4,5
5,0
5,5
6,0
6,5
7,0
7,5
8,0
I IIIIIIVI IIIIIIVI IIIIIIVI II IIIIVI IIIIIIVI IIIIIIVI IIIIIIVI IIIIIIVI II IIIIVI IIIIIIVI IIIIIIVI IIIIIIVI IIIIIIV
1996 1997 1998 1999 000 001 002 003 004 005 006 007 008
Spain
Euro zone (2008)
0
50.000
100.000
150.000
200.000
250.000
I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Housing: investment, employment
(annual growth rate)
-25,0
-20,0
-15,0
-10,0
-5,0
0,0
5,0
10,0
15,0
20,0
I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Inv. Vivienda Ocupados
Housing, Price index
-15
-10
-5
0
5
10
15
20
I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I
2002 2003 2004 2005 2006 2007 2008 2009
Minister io de la Vivienda
TINSA
INE
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Housing sector as %GDP by country Labour force growth in 2008*
Since July 2008 1,3 million people have lost their jobs. The construction sector is thesector with the highest decline in employment and accounts for 40% of the totaldecrease.
Over-sized residential construction sector: theadjustment is costly in terms of employment
EU15* 1,2Germany 0,4
Spain 3,0
France 0,7
Italy 1,4
United Kingdom 1,1
*Average: I-III q
Employment
2007 2008 IV q 2008
Variation pp.
(IVq 2008 -IVq 2007)Spain* 7,5 6,6 6,0 -1,75
Euro area 5,7 5,5 5,3 -0,36
France 5,6 5,6 5,5 -0,18
Germany 5,5 5,4 5,4 0,03
Italy 4,8 4,8 4,8 -0,09
United Kingdom 3,3 3,0 2,9 -0,35
* Spain variation: Iq 2009-IV q2007
7
8
910
11
12
13
14
15
16
17
18
1.500
2.000
2.500
3.000
3.500
4.000
4.500
I IIIIIIV I IIIIIIVI IIIIIIV I II IIIIV I IIIIIIVI IIIIIIV I II IIIIVI II IIIIVI II IIIIVI
2000 2001 2002 2003 2004 2005 2006 2007 200809
unemployed (thousands)unemployment rate (RHS)
Unemployment (2000-2009)
18.000.000
18.200.000
18.400.000
18.600.000
18.800.000
19.000.000
19.200.000
19.400.000
19.600.000
july 2008 may 2009 dif %
Total 19.382.121 18.103.487 -1.278.634 (100)
Construction 2.361.177 1.830.059 -531.118 (41,5)
Industry 2.731.068 2.416.364 -314.704 (24,6)
Services 13.150.027 12.644.412 -505.615 (39,5)
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Spain has had high investment rates for the last 10 years. It was notexclusively housing, e.g. investment in equipment was largerThe large immigration flow (+4 millions between 2000 and 2007) spurred arise in capital expenditure to maintain the capital-per-worker ratio.
Capital-per-worker ratio
A highly indebted economy not all real estate
Investment in equipment (average growth, 1995-2008, %)
0
2
4
6
8
10
Germany
Netherlands
Finland
Austria
EU-15
Denmark
UKItaly
France
Spain
Source: Eurostat
Investment in equipment (average growth, 1995-2008, %)
0
2
4
6
8
10
Germany
Netherlands
Finland
Austria
EU-15
Denmark
UKItaly
France
Spain
0
2
4
6
8
10
Germany
Netherlands
Finland
Austria
EU-15
Denmark
UKItaly
France
Spain
Source: Eurostat
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During 2000-2008 credit grew 8% a year on average, while GDP grew 2.8%.Mortagage credit accounts for 21% of total credit to households, while the EMUaverage is 12%.Construction-related credit is 43% of total business credit. Credit to other productive activities is 57% of total business credit.
Some credit developments.....
0
100.000
200.000
300.000
400.000
500.000
600.000
700.000
800.000
900.000
. .
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
milloneseuros
Servicios (expromotor)
Promotor
Construccion
Industria
Fuente BDE
0
100.000
200.000
300.000
400.000
500.000
600.000
700.000
800.000
900.000
1.000.000
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
milloneseuros
Otros
Consumo
Vivienda
Fuente BDE
Credit to businesses Credit to households
Services(excludingdevelopers)
Developers
Construction
Manufacturing
Other
Consumprtion
Housing
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The financial crisis has transformed the way the balance of payments is financed(from portfolio investment-i.e. mortgage-backed securities-to short term financing ECB)The external financing need of the Spanish economy was 9,1% of GDP in 2008, the
first decline in 5 years
...with a major external financing need
Balance of Payments: financing the deficit
(net flow, M cumulative last 12 months)
18
2022
24
26
28
30
32
I II III IV I II III IV I II III IV I
2006 2007 2008 2009
National investment (m.a.4, %PIB) National savings (m.a.4 %PIB)
currentaccountbalance
-120.000
-80.000
-40.000
0
40.000
80.000
120.000
160.000
200.000
2004 2005 2006 2007 2008 200
Short term financing
P ortfolio investment
Fo reign direct investment
current account balance
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A balanced mix of tradition and innovation
A business model focused on long-term customer-bank relationship:
The emphasis is on the customer as opposed to the product. 54 % of bank assetsare credits, while they only account for 30% of assets in the EMU. The core-business hinges on recurrent operations and multi-product services.Thus: originate-to-hold rather than originate-to-distribute. Borrowers`risk assessment and monitoring are of greater relevance in anoriginate-to-hold framework.
The Spanish banking model at a glance
19%11% 9% 9%
15% 12% 10%7%
18% 19%
10%
4%5% 3%
8%6% 10%
8%
9% 7%
25%
15%12%
11%
13%
12%
39%
36%
25% 28%
0%
10%
20%
30%
40%
50%
60%
70%
UEM Francia Alemania Italia Espaa
Actividades Productivas
Familias no hipotecario
Familias hipotecario
Productive activities
Households nonmortgage
Mortgage
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The Spanish banking sector is highly competitive:
Real lending spread (defined as the difference between real lending rates and realdeposit rates) well below the EU average.Concentration, (as measured by the Herfindhal index: the sum of the square of themarket shares), is also far below the average for EMU countries.
The Spanish banking model at a glance
Herfindhal Index
0
100
200
300
400
500
600
700
2003 2004 2005 2006 2007
Spain
MU13
Italy
Source: ECB
Real interest rate spread
0
0,5
1
1,5
2
2,5
3
3,5
4
2004Apr
2004Jul
2004Oct
2005Jan
2005Apr
2005Jul
2005Oct
2006Jan
2006Apr
2006Jul
2006Oct
2007Jan
2007Apr
2007Jul
2007Oct
2008Jan
2008Apr
2008Jul
2008Oct
Germany
Spain
France
Italy
Real lending spread
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Securitisation in the Spanish banking model is used mainly for funding as opposed torisk-transfer purposes.Since 2003, deposit growth has been lower than credit growth, causing a growingfunding gap. This gap reached 14% of total credit by the end of 2008, while in 2003 itwas 9%.The outstanding value of securitization instruments and bonds issued by the Spanishfinancial system (with data up to the third quarter of 2008) was about 480.000 million
The Spanish banking model at a glance
Issuance of structured securities Funding gap
0
10
20
30
40
50
60
70
80
90
2001 2002 2003 2004 2005 2006 2007 2008
France
GermanyItaly
Spain
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Openness index
One of Europe's most opened economies
Exports are still suffering from the global recession and have declined 19%, which hasaffected goods (-20.5%) and services (-15.9). On the other hand, imports of goods andservices decreased 22.3%
0,00
10,00
20,00
30,00
40,00
50,00
Espaa Alemania Francia Italia Reino Unido EEUU Japon
Importaciones (%PIB)Exportaciones (%PIB)Imports (% GDP)Exports (% GDP)
Spain Germany France Italy UK US Japan
World exports
-60,0
-50,0
-40,0
-30,0
-20,0
-10,0
0,0
10,0
20,0
30,0
40,0
e f m amjn jl a s o n d e f m amjn jl a s o n d e f m amjn jl a s o n d e f m
2006 2007 2008 2009
World exports
Industrial countriesOther countries
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In light of G20 recommendations, all countries have put in place the largest concerted
effort to support demand and employment in history
The policy response: Fiscal policies aimed atsupporting employment and output and resumingcredit to the economy
Spain is one of the countries that have made a greater fiscal effort, as comparedto the other main developed economies and to other EU countries.Also, according to the OECD, Spain was the third developed country toimplement a stimulus package. The measures included in Plan E couldcontribute 1% GDP Growth in 2009.
Source: OCDE
Effect on GDP level (%), 2009-2010
0
0,5
1
1,5
2
2,5
SpainAustralia
China
UnitedStates
CanadaGermanyKoreaMexico Average
JapanUKFrance India Brazil
Italy
2008 2009
Approximate cost of the discretionalmeasures 2008-2009 (%GDP)
Source: IMF
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This stimulus, named Plan E, uses both the revenue side and the expenditure side in
order to create a fiscal mix to foster the economic activity. In the revenue side, whichamount 2/3 of the total amount, include tax cut in PIT (Personal Income Tax), CIT(Corporate Income Tax) VAT and the elimination of the wealth tax. In the expenditureside is included an ambitious investment plan of 0.8 GDP points, and an industrial fundof 0.3 GDP, to foster the new economic model, including R&D.
The policy response: Fiscal policies aimed atsupporting employment and output and resumingcredit to the economy
In addition to this, we should take into account the effect of the automaticstabilizers, amounting 2.5 GDP points only in 2009, according to the Bank ofSpain.
2008 2009
Total Fiscal effort 2,5 4,7
Tax cuts 1,8 1,1
Expenditure 0 1,1
Automatic stabilizers 0,7 2,5
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Rigorous fiscal policy over the booming years pays off: A
comfortable margin for countercyclical fiscal policies.
Rigorous fiscal policy before the crisis: three years of surplus
Debt/GDP ratio among the lowest in advanced economies.
Countercyclical policies over the recession will only have a limited impact on the ratio. As a
result, the expected debt/GDP ratio in 2010 remains well below EU average.
0
20
40
60
80
100
120
140
Spain Germany United
Kingdom
France Italy
2008 2009 2010
Public debt (%PIB)
Source: European Comission, spring 2009.
-5,00
-4,00
-3,00
-2,00
-1,00
0,00
1,00
2,00
3,00
199 7 199 8 199 9 200 0 200 1 200 2 200 4 200 5 200 6 2008
Espaa Italia UE27
Deficit (%PIB)
Source: Eurostat.
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The timing of the crisis in Spain: the current situation.
The crisis hit Italian output harder than Spanish output. This can be observedboth in quarter-on-quarter growth (-1,9% vs. -2,6%) and in year-on-yeargrowth (-3% vs. -6%).
In terms of employment (LFS) the opposite is true. In the first quarter of2009, Spanish employment has decreased -6,4% compared with the same
quarter of 2008, while it Italy it has decreased only -0,9%.
1Q 2009 (QoQ) Spain Italy
GDP volumes -1,9 -2,6
Final consumption expenditure -1,3 -0,8
Household and NPISH final consumption expenditure -1,7 -1,0
Final consumption expenditure of general government -0,1 -0,3
Gross capital formation -4,4 -6,8
Gross fixed capital formation -4,2 -5,0
Exports of goods and services -11,9 -11,8
Imports of goods and services -10,9 -9,2
1Q 2009 (YoY) Spain Italy
GDP volumes -3,0 -6,0
Final consumption expenditure -1,7 -1,7
Household and NPISH final consumption expenditure -4,0 -2,5
Final consumption expenditure of general government 5,4 0,7
Gross capital formation -13,3 -15,2
Gross fixed capital formation -13,1 -12,6
Exports of goods and services -19,0 -21,7
Imports of goods and services -23,3 -17,0
2008 Spain Italy
GDP volumes 1,2 -1,0
Final consumption expenditure 1,5 -0,5
Household and NPISH final consumption expenditure 0,1 -0,9
Final consumption expenditure of general government 5,3 0,6
Gross capital formation -2,8 -4,2
Gross fixed capital formation -3,0 -3,0
Exports of goods and services 0,7 -3,7
Imports of goods and services -2,5 -4,5
GDP per capita PPP 104 100