1. Monetary policy
sets the pace
S E P T E M B E R
2 0 2 3

2. ECONOMY
Global

3. MONETARY POLICY SETS THE PACE
Summary
Global economic situation
The global recovery after the pandemic and the Russian invasion of Ukraine is slowing down with significant
asymmetries between economic sectors and regions.
The IMF forecasts a slowdown in global growth from an estimated 3.5% in 2022 to 3.0% in 2023 and 2024, 8
tenths of a percentage point lower than the annual average for the period 2000-19. The tightening of monetary
policy to control inflationary pressures is already having an effect on economic dynamism, although the
restoration of pre-pandemic conditions in supply chains and the good performance of the services sector are
acting as positive factors for growth.
Inflation remains high and is eroding household purchasing power. The IMF estimates that it will fall from 8.7%
in 2022 to 6.8% in 2023 and 5.2% in 2024. The correction of core inflation will be more gradual.
Against this backdrop, downside risks to global growth persist. These include renewed inflationary pressures,
renewed turbulence in the financial markets in the face of a possible tightening of monetary policies and credit
scarcity, a slowdown in the recovery of the Chinese economy, a slowdown in activity in the Eurozone, high levels
of sovereign debt, the continuation of the war in Ukraine and geo-economic and strategic uncertainty.
3
3.0%
y-o-y
6.8%
5.2% in 2024
Global GDP 2023
3.0% in 2024
Inflation 2023
y-o-y

4. MONETARY POLICY SETS THE PACE
1
2
4
5
6
3
7
8
Despite the moderation of the headline inflation rate, core inflation persists at high levels
above the targets of the main Central Banks
Limitation of fiscal support measures
UNCERTAINTY
AND VOLATILITY
IN THE GLOBAL
SCENARIO
Major obstacles to global economic growth
High levels of sovereign indebtedness, mainly in emerging and developing economies
4
Complexity of the geoeconomic and geopolitical environment: Russia-Ukraine war, China-US
tensions over Taiwan's status quo, Iran's uranium enrichment program ...
Erosion of household disposable income and corporate profits, with impact on
consumption, savings and investment decisions
Tighter financial conditions due to the change in monetary policy stance of the main
Central Banks
Slowdown in the Chinese economy, which accounted for more than 40% of global growth in
the decade prior to COVID
Climate risks

5. MONETARY POLICY SETS THE PACE
3.9
3.5
4.1
2022 2023 2024
Sub-Saharan
Africa
3.9
1.9 2.2
2022 2023 2024
Latin America and
Caribbean
4.5
5.3
5.0
2022 2023 2024
Emerging and
developing Asia
5.4
2.5 3.2
2022 2023 2024
Middle East and
Central Asia
2.1 1.8 1.0
2022 2023 2024
US
4.0
4.0
4.1
2022
2023
2024
Emerging and
developing
economies
2.7
1.5
1.4
2022
2023
2024
Advanced
economies
3.5
3.0
3.0
2022
2023
2024
World
Resilience in the short term
Source: Círculo de Empresarios based on IMF, 2023.
Advanced economies continue to weigh on
global growth
5
IMF forecasts
3.5
0.9 1.5
2022 2023 2024
Eurozone

6. MONETARY POLICY SETS THE PACE
80
85
90
95
100
105
110
115
120
Q4
19
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Services
China
Eurozone
US
80
85
90
95
100
105
110
115
120
Q4
19
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Industry
China
Eurozone
US
108.3
2.3
-9
-6
-3
0
3
6
9
12
90
92
94
96
98
100
102
104
106
108
110
Q4
19
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23
Q4 19 = 100
% y-o-y change (right axis)
The service sector drives economic activity
Source: Círculo de Empresarios based on IMF and Oxford Economics, 2023. 6
The global economy held up better than expected in Q2 23. The dynamism of services stands out, while indicators in non-related sectors, including manufacturing, point
to a slowdown in activity, especially in advanced economies
Global GDP advanced 2.3% y-o-y in Q3 23 and was 8.3% above the
pre-pandemic level (Q4 19)
Value added of services and industry in major economies
Q4 19 = 100
However, industrial GVA in
China ▲

7. MONETARY POLICY SETS THE PACE
3.9
4.7
8.7
6.8
5.2
0
1
2
3
4
5
6
7
8
9
10
Average 2000-20 2021 2022 2023* 2024*
Global
Advanced economies
Emerging and developing economies
Persistently high levels of underlying inflation
7
Moderation of headline inflation
% y-o-y change
Source: Círculo de Empresarios based on IMF and Oxford Economics/Haver Analytics, 2023.
Expectations that CBs will further tighten monetary policy in the face of
high levels of core inflation, except in Latin America
Core inflation, % y-o-y change
* Forecasts
Headline inflation moderates, but core inflation slows, remaining well above the targets of most Central Banks (CBs)
6.5
6.0
4.7
2022 2023* 2024*
Monetary policy reference interest rate, %
-2
0
2
4
6
8
10
12
14
Q1
19
Q2
19
Q3
19
Q4
19
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23*
Q4
23*
Brazil China
Eurozone Japan
UK US

8. MONETARY POLICY SETS THE PACE
11
12
13
14
15
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
-2.9 pp
2016 2018 2020 2022
13.5
12.5
11.5
Loss of dynamism in world trade
Source: Círculo de Empresarios based on IMF, Kiel Institute and UNCTAD, 2023. 8
The slowdown in world trade in 2023 reflects the trajectory of global demand, shifts in its composition towards domestic services, the lagged effects of dollar
appreciation and rising trade barriers. Problems in the Panama or Suez canals put global trade in check and could exacerbate its downward trend
12.4
0.6
10.9
7.9
9.5
8.0
3.0
-10.3
12.8
7.0
3.2
3.9
2.2
5.6
1.0
-7.8
10.7
5.2
2.0
3.7
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023*
2024*
IMF forecasts global trade slowdown from 5.2% in 2022 to 2% in 2023
% y-o-y change
Average 2000-19 = 4.9%
* Forecasts
Decline in US-China trade interdependence
Weak trade figures and a decline in container traffic
Million TEUs (20-foot equivalent units)
Jul.23: standard container
vol. shipped ▼ to 13.7 million
TEU, -4% r/max. spring 2022
US-China bilateral trade (X+M) over total trade between both countries

9. ECONOMY
Asia

10. MONETARY POLICY SETS THE PACE
-2
-1
0
1
2
3
4
5
6
7
8
9
10
11
Q2
19
Q4
19
Q2
20
Q4
20
Q2
21
Q4
21
Q2
22
Q4
22
Q2
23
Q4
23*
China: recovery stagnates
* Forecasts
Source: Círculo de Empresarios based on Oxford Economics/Haver Analytics, 2023.
According to forecasts by Oxford Economics, GDP growth will
reach 5.1% in 2023 and 4.6% in 2024
% y-o-y change
10
The Chinese economy is affected by the persistence of the real estate crisis, the risks of high levels of local indebtedness, sluggish domestic demand, the weakness of
the labour market and the fall in external demand. All these factors are negatively affecting expectations for its industrial and foreign sectors
Estimates by Oxford Economics put
the volume of debt associated
with the real estate sector at
approximately 43% of China's
GDP
The real estate crisis is reflected in a sharp drop in prices, a reduction in
investment, an increase in unsold real estate inventories and a greater risk of
default by developers
The authorities' focus on meeting their official growth target is manifested in
increasingly frequent waves of policy announcements aimed at stabilizing market
confidence and supporting economic activity
Evolution of housing prices
% y-o-y change
Housing starts and sales
↓
47% and 66%
levels mid 2021
(respectively)

11. MONETARY POLICY SETS THE PACE
80
90
100
110
120
130
140
150
Jul-21
Sep-21
Nov-21
Jan-22
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
May-23
Jul-23
US EU
China Asia exc. China
-6
-5
-4
-3
-2
-1
0
1
2
3
2019 2020 2021 2022 2023* 2024*
Private consumption Public consumption
Investment Net exports
Change in inventories GDP
Recent▲in autoshipmentstoEUandUS→offsetby weakAsiandemand,especiallyforcapitalgoods
Japan: external sluggishness limits growth
* Forecasts Oxford Economics
Source: Círculo de Empresarios based on Oxford Economics/Haver Analytics and BoJ, 2023.
GDP % y-o-y change and component contributions in pp
11
Slight increase in the Japaneseeconomy of 6 tenths to 1.6%
in 2023* to be contained in 2024* (0.6%)
Real exports 2020 = 100
Goods exports contracted by 0.3% y-o-y in Jul.23,following a 1.5% advance in Jun.23
Asia
exc. China
37.1
China
19.4
US
18.6
Other
15.4
EU
9.5
% s/ total exports from Japan
Real export
performance by
type of goods
% y-o-y change

12. ECONOMY
America

13. MONETARY POLICY SETS THE PACE
0
2
4
6
8
10
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23*
Q4
23*
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Q1
25*
Q2
25*
Q3
25*
Q4
25*
Headline
Core
6.3 7.0
2.7
7.0
-1.6
-0.6
3.2 2.6 2.0 2.1
4.1
-1.0 -1.7
0.6
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23*
Q4
23*
Q1
24*
Q2
24*
• Cumulative Fed interest rate hikes
• Tighter credit conditions
• Inflation
Consumers + companies →▼ expenses, contracting and
investment
US: mild recession expected by the end of 2023
Source: Círculo de Empresarios based on Oxford Economics, 2023.
% annualized quarterly change
13
Likely recession with quarterly GDP declines of 1% in Q4 23 and
1.7% in Q1 24
Inflation is approaching the Fed target (2%)
% y-o-y change
% y-o-y change
Weak demand, supply chain
tightening, lower rents and less
dynamic labour market, leading
to a decline in tenure
Fed to pause before cutting rates
* Forecasts
% y-o-y change
0
1
2
3
4
5
6
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23*
Q4
23*
Q1
24*
Q2
24*
Q3
24*
Q4
24*
10-year treasury yield
Federal funds rate

14. MONETARY POLICY SETS THE PACE
* Forecasts
Source: Círculo de Empresarios based on Oxford Economics and Bank of Spain, 2023.
Despite the better-than-expected GDP performance at the beginning of the year, forecasts point to a significant slowdown in H2 23. This is due to lower growth in
advanced economies, the fall in commodity prices, the restrictive monetary policy stance and significant uncertainty
% y-o-y change
14
The risks of recession have diminished, but have not entirely
disappeared and economic dynamism is declining
Economic policy uncertainty rises, except in Mexico and Argentina
The rapid and intense monetary tightening in the region, which preceded
that in the US and Europe, paused in Apr. 23
Inflation moderates in H1 23, with core inflation holding up
% y-o-y change
Rates in %
Growth and inflation in Latin America
Aggregate of Brazil, Chile, Colombia, Mexico and Peru
Level of uncertainty
10.6 10.2
0
2
4
6
8
10
12
Jan-00
Sep-00
May-01
Jan-02
Sep-02
May-03
Jan-04
Sep-04
May-05
Jan-06
Sep-06
May-07
Jan-08
Sep-08
May-09
Jan-10
Sep-10
May-11
Jan-12
Sep-12
May-13
Jan-14
Sep-14
May-15
Jan-16
Sep-16
May-17
Jan-18
Sep-18
May-19
Jan-20
Sep-20
May-21
Jan-22
Sep-22
May-23
Headline Core

15. MONETARY POLICY SETS THE PACE
75.6 74.6
80.3
83.9
86.8
65
70
75
80
85
90
2022 2023* 2024* 2025* 2026*
Brazil: slowdown and doubts about fiscal consolidation
* Forecasts
Source: Círculo de Empresarios based on Oxford Economics/Haver Analytics, 2023.
15
The recent proposed fiscal framework to revise the spending limit will
not serve to maintain the debt-to-GDP ratio in the short term
Expected drop in investment and moderation in private consumption
weigh on growth in 2023
% GDP
H2 23 marked by a downward correction in domestic demand due to restrictive financial conditions, reduced fiscal stimulus and slow momentum in foreign trade. In
the long term, Oxford Economics estimates an average GDP growth of 1.9% due to supply-side handicaps (institutional, demographic and physical/human capital)
Economic risk in line with the average for emerging countries
Scores between 1 and 10, with 10 representing the highest risk
Record cereal harvest has moderated food prices, amid rising
energy and utility prices
% y-o-y change
% y-o-y change CPI
5.3
7.7
9.6 10.5 10.7 11.9
8.7
6.1 5.3
3.8 4.8 5.1 4.7 4.2 4.1 3.9 3.9 3.9 4.0 4.0
0
5
10
15
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23*
Q4
23*
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Q1
25*
Q2
25*
Q3
25*
Q4
25*

16. MONETARY POLICY SETS THE PACE
-25
-20
-15
-10
-5
0
5
10
15
20
25
Q1
19
Q2
19
Q3
19
Q4
19
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23*
Q3
23*
Q4
23*
Q1
24*
Q2
24*
Q3
24*
Q4
24*
GDP expected to fall by 2% in 2023 due to the contraction of
consumption and investment and the effect of the severe drought on
agricultural production
0
200
400
600
800
1000
2021 2022 2023* 2024*
Argentina: persistent recession
* Forecasts
Source: Círculo de Empresarios based on Oxford Economics/Haver Analytics and OECD, 2023.
16
% y-o-y change
In H1 23, downward revisions have shown a deeper contraction of the Argentine economy in a context of worsening inflation outlook. Following the agreement with the
IMF, the authorities should commit to structural changes to improve potential GDP growth
-2 -9.6
10.8
5
-2
0.8
Downside risks
Low foreign exchange reserves
Tight monetary restrictions
Large volumes of Central Bank bonds
Possible currency devaluation
Inflationary spiral
If ▲ public spending→ in risk
planned fiscal adjustment
Higher demand for Argentine
exports could ▲ growth and
foreign exchange inflows,
with less pressure on the
exchange rate
After candidate Milei won the primary elections and in view of
high financial volatility, the Central Bank recalibrated the official
exchange rate
Peso per US$
Scores between 1 and 10, with 10
representing the highest risk
High economic
risk

17. MONETARY POLICY SETS THE PACE
4.0
11.25
0
2
4
6
8
10
12
14
Mar-21
Apr-21
May-21
Jun-21
Jul-21
Aug-21
Sep-21
Oct-21
Nov-21
Dec-21
Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Pessimism about the medium-term
outlook for the domestic and global
economies will be a drag on
investment
The peso is vulnerable to episodes of risk
aversion and volatility in emerging markets
due to its high liquidity and large trading
volumes
Mexico: in step with the North American economy
* Forecasts
Source: Círculo de Empresarios based onOxford Economics/Haver Analytics and Banxico, 2023.
17
% y-o-y change
GDP forecast for 2023 is supported by investment dynamism and
resilience of private consumption due to the strength of the labour market
% y-o-y change
The upward revision of the national accounts, due to methodological changes and readjustment to 2018 prices, evidenced a remarkable dynamism of the Mexican
economy. The slowdown forecast by Oxford Economics for the second half of the year is softening in the wake of the US economic evolution
Mexico economic risk has deteriorated marginally in the last six
months to 5.0, but remains better than the emerging markets average
Risks of trade tensions remain
high due to AMLO's unpredictable
economic agenda
Good downward performance of core inflation, although
the rest of the components contribute more to disinflation
25 bp rate cut expected by the end of the year
+7.5 bp
0
1
2
3
4
5
6
7
8
9
Jan-21
Feb-21
Mar-21
Apr-21
May-21
Jun-21
Jul-21
Aug-21
Sep-21
Oct-21
Nov-21
Dec-21
Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Headline Core Banxico target

18. MONETARY POLICY SETS THE PACE
11.0
7.3
0.9
0.1
0
2
4
6
8
10
12
2021 2022 2023* 2024*
Chile and Colombia: domestic demand weakens
* Forecasts
Source: Círculo de Empresarios based on Oxford Economics/Haver Analytics and OECD, 2023.
18
% y-o-y change
Chile's GDP is expected to fall 0.4% in 2023 due to lower demand and
industrial activity, marked by political uncertainty
Economic activity in Colombia has already felt the effects of high
inflation and the tightening of monetary policy
Risks
GDP: the country should remain in a shallow recession until Q4 23
Inflation: high, but the disinflation process is already well established
Current account: adjustment in the short term due to weak domestic demand
Public accounts: the post-pandemic adjustment is over
Public debt: expected to fall below 30% of GDP by 2030
External debt: the revaluation of the peso brings it below 80% of GDP
% y-o-y change and %
Inflation moderates and monetary policy is expected to be less
restrictive by the end of 2023
% y-o-y change GDP
3,9
9
0
5
10
15
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023*
2024*
Inflation Interest rates

19. ECONOMY
Europe

20. MONETARY POLICY SETS THE PACE
EU growth forecast downgraded
* Forecasts
Source: Círculo de Empresarios based on European Commission, 2023.
20
% y-o-y change
GDP slows to 0.8% in 2023* due to lack of strong growth driver and
weak domestic and foreign demand
Inflation will moderate from 9.2% in 2022 to an expected 3.2% in 2024*
in the face of monetary tightening and falling commodity prices
% y-o-y change HCPI
Growth of major economies ...
% y-o-y change
Inflation in major economies ...
% y-o-y change HCPI
3.4
0.8
1.4
3.3
0.8
1.3
3.2
3.2 3.2
2022 2023* 2024*
EU
Eurozone
World (exc. EU)
0.8
1.4
0.7
2.9
9.2
6.5
3.2
2014-18 2019 2020 2021 2022 2023* 2024*
Eurozone
EU

21. MONETARY POLICY SETS THE PACE
Deterioration in PMIs, mainly in manufacturing
Source: Círculo de Empresarios based on Investing, 2023. 21
Manufacturing Services
Jun.22 – Jul.23 Aug.23 Jun.22 – Jul.23 Aug.23

22. MONETARY POLICY SETS THE PACE
Source: Círculo de Empresarios based on Eurostat and CaixaBank Research, 2023.
Inflation to fall, with resistance from service prices
% y-o-y change HCPI
In Aug.23, headline inflation stood at 5.2% y-o-y
and core* inflation at 5.3%
22
Overall HCPI main Eurozone economies
% y-o-y change
* Exc. energy, food, alcohol and tobacco (ECB definition)
By type of goods
% y-o-y change
€
-1
1
3
5
7
9
11
Aug-20
Oct-20
Dec-20
Feb-21
Apr-21
Jun-21
Aug-21
Oct-21
Dec-21
Feb-22
Apr-22
Jun-22
Aug-22
Oct-22
Dec-22
Feb-23
Apr-23
Jun-23
Aug-23
Headline
Core
Average
2022 May.23 – Aug.23

23. MONETARY POLICY SETS THE PACE
12.2
6.4
25.5
13.8
6
8
10
12
14
16
18
20
22
24
26
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Jan-19
Jul-19
Jan-20
Jul-20
Jan-21
Jul-21
Jan-22
Jul-22
Jan-23
Jul-23
Total
< 25
Top5 unemploymentrate<25years
(Eurozone average = 13.8%)
Eurozone: unemployment at historic lows
Source: Círculo de Empresarios based on Eurostat, 2023. 23
Eurozone unemployment rate hits Jul. 23 low at 6.4%, but employment
expectations fall due to lower optimism
Unemployment rate as % of labour force
In Jul. 23, Spain leads in total unemployment (11.6%) and under-25
unemployment (27%)
Unemployment rate % labour force
Spain
1
Greece
2
Italy
3
Slovakia
4
Portugal
5
27
23.2
22.1
19.9
19.2
6.4

24. MONETARY POLICY SETS THE PACE
-1
1
3
5
7
9
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23*
Q4
23*
Q1
24*
Q2
24*
Q3
24*
Q4
24*
Headline
Core
-1
0
1
2
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Q3
23*
Q4
23*
Q1
24*
Q2
24*
Q3
24*
Q4
24*
% quarterly change
% y-o-y change
Germany: risk of recession in the second half of 2023
* Forecasts
Source: Círculo de Empresarios based on Oxford Economics/Haver Analytics and Destatis, 2023.
24
Expectations of recession in Q3 23, driven by industry production cuts
% y-o-y change
Inflation to average 5.8% in 2023 and decelerate to below 2% in 2024
% y-o-y change
Weak outlook for foreign demand and investment, coupled with structural challenges in key sectors, drive Germany's underperformance in 2023 and 2024
GDP evolution Production index
Downward trend in 2023 due to:
• Policy measures
• Fall in raw material prices
• Reduction of supply bottlenecks
• Favorable base effects
Although the recent oil price increases will limit the fall
-3
-2
-1
0
1
2
3
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
May-23
Jul-23
% monthly change

25. ECONOMY
Spain

26. MONETARY POLICY SETS THE PACE
1
2
3
4
Efficient and transparent implementation of European funds associated
with the Recovery and Resilience Plan (RRP)
Fiscal consolidation, prioritizing efficiency and evaluation of
public expenditures
Implementation of the necessary structural reforms in the right
direction to achieve a competitive, sustainable and inclusive
economic model
AMONG
WHICH WE
HIGHLIGHT …
Challenges for the Spanish economy remain
Moderation of inflation to minimize its impact on businesses and
households
26
Energy transition
5

27. MONETARY POLICY SETS THE PACE
Headwinds slowing the economic recovery
27
Persistent underlying inflation. Deterioration of competitiveness due to▲ prices and possible second round effects on wages
X
More moderate employment dynamics
X
Confrontation and political uncertainty with government in office
X
Tighter financing conditions
X
Economic weakness of major trading partners
X
Lack of transparency and delay in the execution of European funds
X
Labour supply shortage for jobs resulting from the green and digital transitions
X
Uncertainty about legal security
X

28. MONETARY POLICY SETS THE PACE
High volatility in growth forecasts
In its Sep. 231 forecast, the Bank of Spain maintains its GDP growth
estimate of +2.3% in 2023 and reduces by 4 tenths of a pp that of 2024
% y-o-y change
1 In its latest forecast of 19 Sep. 23, the Bank of Spain does not yet take into account the upward
revision of INE's GDP growth for 2021 and 2022
* Forecasts
Source: Círculo de Empresarios based on Bank of Spain and FUNCAS, 2023.
28
Forecasts from other national and international organizations
% y-o-y change
High uncertainty in the forecasts for ...
• Difficulties in assessing the impact of monetary policy tightening on
GDP growth, price developments and financial market performance
• Possibility of second-round effects on inflation via wages or
business margins
• Weak external environment
• Evolution of geopolitical tensions, especially the war in Ukraine
5.8
2.3
1.8
2.8
2.6
5.5
2.3
2.2
2022 2023* 2024*
Sep-23
Jun-22
Dec-22
Jun-23

29. MONETARY POLICY SETS THE PACE
Signs of deterioration in economic activity
In Jul. 23, manufacturing and services PMIs fall for 4th
consecutive month
Source: Círculo de Empresarios based on Markit, INE and CIS, 2023.
<50: contracción de actividad; > 50: expansión de actividad
29
Four months of decline in industrial production
% y-o-y change IPI
Greater ▼
• Energy → -10.8
• Durable consumer goods → -7.3
Significant declines in industrial and services turnover
% y-o-y change
Services
Industry
-5
0
5
10
Jul-21
Aug-21
Sep-21
Oct-21
Nov-21
Dec-21
Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
46.5
49.3
40
44
48
52
56
60
64
Jan-21
Mar-21
May-21
Jul-21
Sep-21
Nov-21
Jan-22
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
May-23
Jul-23
Manufacturing PMI
Services PMI Jun.21 – Jun.23 Jun.21 – Jun.23

30. MONETARY POLICY SETS THE PACE
Max.
10.8
2.6
6.1
0
1
2
3
4
5
6
7
8
9
10
11
Feb-21
Apr-21
Jun-21
Aug-21
Oct-21
Dec-21
Feb-22
Apr-22
Jun-22
Aug-22
Oct-22
Dec-22
Feb-23
Apr-23
Jun-23
Aug-23
Headline
Core
3.6
4.3
1.8
4.1
2.3
1.7
2023* 2024* 2025*
Headline Core
Core inflation remains at high levels
Source: Círculo de Empresarios based on INE and Bank of Spain, 2023.
Uptick in inflation in Aug. 23 (2.6% y-o-y vs. 2.3% in Jul. 23), mainly
due to ▲ tourism and fuel prices
% y-o-y change
High increases in food prices
Aug. 23 CPI.; % y-o-y change
* Forecasts
30
HCPI
forecasts
Bank of
Spain
Risks to the moderation of inflationary pressures
• Asymmetries in the pass-through of ▼energy prices to consumer prices
• Possible ▲ energy prices due to OPEC+ production cut
• Possible ▲ some food prices due to the impact of drought and Putin's
cancellation of Ukraine grain export deal
• Possible second round effects via wages/business margins
Persistently
high core
inflation

31. MONETARY POLICY SETS THE PACE
94
96
98
100
102
104
106
108
110
112
114
Q2
18
Q3
18
Q4
18
Q1
19
Q2
19
Q3
19
Q4
19
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Total
Public
Priavte
Q3 07
20.8
Q2 23
21.1
7
9
11
13
15
17
19
21
23
25
27
16
17
18
19
20
21
22
Q2
02
Q1
03
Q4
03
Q3
04
Q2
05
Q1
06
Q4
06
Q3
07
Q2
08
Q1
09
Q4
09
Q3
10
Q2
11
Q1
12
Q4
12
Q3
13
Q2
14
Q1
15
Q4
15
Q3
16
Q2
17
Q1
18
Q4
18
Q3
19
Q2
20
Q1
21
Q4
21
Q3
22
Q2
23
Employed Unemployment rate
(right axis)
More employment, but more precarious
Source: Círculo de Empresarios based on INE, 2023.
In Q2 23, 21.1 million people were employed and the unemployment rate
reached 11.6%
Q2 18 =100
31
Since Q2 18, public sector employment increased by 12.8%,
4.7 pp higher than in the private sector
Services → 77% of employed, ▲ 10.5 pp r/ 07 (Industry → 12.9% de employed, ▼ 3.3 pp r/ 07)
Employedpart-time→▲25.7%r/previousmax.Q307(+78.6%inthecaseofpermanentemployees)
92% of part-time employees work in the service sector
Since Q2 18: ▲ employed = 1.7 M (+8.9%)
• +400,00 in public sector (+12.8%)
• +1.3 M in private sector (+8.1%)
Millions employed and % labour force

32. MONETARY POLICY SETS THE PACE
-280000
-240000
-200000
-160000
-120000
-80000
-40000
0
40000
80000
120000
160000
200000
Aug-14
Aug-15
Aug-16
Aug-17
Aug-18
Aug-19
Aug-20
Aug-21
Aug-22
Aug-23
Original series
Seasonally adjusted
In Aug. 23, the number of registered unemployed increased by 24,826
compared to Jul. 23, despite not including inactive permanent
unemployed
Loss of dynamism in job creation
Source: Círculo de Empresarios based on Ministry of Inclusion, Social Security and Migration, 2023.
In Aug. 23, average Social Security enrollment fell by 185,385
persons r/Jul. 23, mainly in the services sector (-136,535)
Absolute monthly variation in average number of Social Security affiliates in August
Absolute monthly change in number of unemployed Aug. Original series
Total average number of
affiliates Aug.23
20,706,500
Original series
20,722,990
Seasonally adjusted
+555,370
average affiliates r/Aug.22
+549,543
in seasonally adjusted
Absolute y-o-y change
Total number of unemployed
Aug.23
2,702,700
32
8070
21679
14435
46400 47047
54371
29780
-82583
40428
24826
-90000
-70000
-50000
-30000
-10000
10000
30000
50000
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
60.3% women

33. MONETARY POLICY SETS THE PACE
78.7
17.4
3.9
74.4
18.7
6.9
Full time Part time Discontinuous permanent
employees
Dec-21 Aug-23
25.4
17.3
23.9
13.9
31.0 31.1
12
14
16
18
20
22
24
26
28
30
32
34
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23
Total Private sector Public sector
Effects of the labour reform
Source: Círculo de Empresarios based on Ministry of Inclusion, Social Security and Migration and INE, 2023.
Since the publication of the labour reform in the BOE (30 Dec. 21), the
temporary employment rate of employees has fallen 8.1 pp to 17.3% in
Q2 23, due to a decrease in the private sector (-10 pp)
Between Dec. 21-Aug. 23, the number of workers with fixed-term
contracts multiplied by 2.3 and part-time employment grew by
38% compared to +20.8% for full-time workers
33
% of total affiliates with permanent contracts
Temporary employment rate as % of total salaried employees (EPA-INE)
Dec. 21 Jan. 23
Full time
Part time
Discountinous
permanent
7.7
1.7
0.4
9.3
2.3
0.9
Millions affiliated with indefinite-term contracts
Total 9.8 12.5
▲20.8%
▲38%
X 2.3
▲27.9%
The weight of part-time and permanent seasonal
workers increased by 4.4 pp over the total number
of permanent employees
Publication
BOE
Effective
date

34. MONETARY POLICY SETS THE PACE
0
2
4
6
8
10
12
1200
1250
1300
1350
1400
1450
1500
1550
1600
Jan-20
Mar-20
May-20
Jul-20
Sep-20
Nov-20
Jan-21
Mar-21
May-21
Jul-21
Sep-21
Nov-21
Jan-22
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
May-23
Jul-23
bn € % y-o-y change (right axis)
Continued increase in public debt
Persistent imbalances in public accounts
Jul. 23 → € 1,551.8 bn
Consolidated deficit PPAA *
* In National Accounts terms. Without Local Corporations
Source: Círculo de Empresarios based on IGAE and Bank of Spain, 2023.
June ; million €
34
-2.4% GDP -2.14% GDP
** AAOO: Autonomous Organizations; LLCC: Local Corporations
Debt by subsector Jul. 23
The fiscal response to the pandemic accentuated the deterioration of public finances and pushed debt much higher. Fiscal consolidation remains a priority
Reduction in part because income benefits from higher inflation
-31818 -30186
-35000
-30000
-25000
-20000
-15000
-10000
-5000
0
5000
2022 2023
Central adm. AACC Soc. Sec. Total
State AACC Soc. Sec. AAOO** LLCC*
bn € 1,390.3 325.8 106.2 42.1 23.5

35. MONETARY POLICY SETS THE PACE
140000
150000
160000
170000
180000
190000
200000
210000
220000
230000
240000
250000
260000
270000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Exports
Imports
-3.7% y-o-y
Exports
+3.3% y-o-y
Jan.-Jul. 23
Slowdown in foreign trade
Source: Círculo de Empresarios based on Ministry of Industry, Trade and Tourism, 2023.
€ 230,397 M
Imports
Balance
€ -21,323 M
€ 251,719.9 M
Energy € -19,324 M
Jan-Jul. 23 trade deficit down 44.6% r/ Jan-Jul. 22
Non-energy € -1.999 M
Million €; Jan.-Jul. each year
Top 3 exports by sector
Chemical prod.
▲1.7%
17.9%
Food, beverage
and tobacco
▲6.4%
17.4%
Capital goods
▲ 13.2%
19%
Weight in % of total and % y-o-y change
-37.8% y-oy
vs. € -7,478.5 M
Jan.-Jul.22
Asia
4.8 % 4.0 %
Exports by destination
63.1%
EU-27
55.2%
Eurozone
10.8%
America
% y-o-y change
8.3 %
% total
7.5%
-4.7 %
35
Exports reach record highs
but grow at slower pace

36. MONETARY POLICY SETS THE PACE
0
5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec.
2023
2019
2020
2021
2022
times r/ Jan.-July 22
International tourist arrivals
x 1.2
Jan.- Jul. 23
Tourism recovers pre-pandemic levels
Source: Círculo de Empresarios based on INE, 2023.
47,628,867 turistas
Tourism expenditure
Jan.- Jul. 23
€ 59,863.84 M
€1,257 per turista
3.7%
y-o-y
In Jan.23-Jul. 23 cumulative tourist arrivals were 0.8% below the level of the
same period in 2019
x 1.3
times r/ Jan.-July 22
36
Million tourists
Million €
+14.7% r/ same period in 2019
0
10.000
20.000
30.000
40.000
50.000
60.000
70.000
80.000
90.000
100.000
Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec.
2023
2019
2020
2021
2022

37. MONETARY POLICY SETS THE PACE
MARKETS

38. MONETARY POLICY SETS THE PACE
Stock markets: better results than in 2022 and volatility
Recovery of the world stock market index (MSCI World)
Source: Círculo de Empresarios based on Investing, 2023.
Markets remain highly volatile
Jan. 2021 = 100
Price US$
38
1700
1900
2100
2300
2500
2700
2900
3100
3300
Jan-20
Mar-20
May-20
Jul-20
Sep-20
Nov-20
Jan-21
Mar-21
May-21
Jul-21
Sep-21
Nov-21
Jan-22
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
May-23
Jul-23
Sep-23 60
70
80
90
100
110
120
130
Jan-21
Mar-21
May-21
Jul-21
Sep-21
Nov-21
Jan-22
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
May-23
Jul-23
Sep-23
IBEX-35
S&P 500
Euro Stoxx 50
Emerging MSCI

39. MONETARY POLICY SETS THE PACE
Increase in Spanish and Italian risk premiums, although they
remain at moderate levels
Source: Círculo de Empresarios based on Investing, 2023.
Widespread increases in 10-year bond yields, which increase the
cost of capital
%
39
Fixed income: profitability gains
Basic points
-1
0
1
2
3
4
5
Jan-20
Mar-20
May-20
Jul-20
Sep-20
Nov-20
Jan-21
Mar-21
May-21
Jul-21
Sep-21
Nov-21
Jan-22
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
May-23
Jul-23
Sep-23
Germany
Spain
UK
US
50
70
90
110
130
150
170
190
210
230
250
Jan-20
Mar-20
May-20
Jul-20
Sep-20
Nov-20
Jan-21
Mar-21
May-21
Jul-21
Sep-21
Nov-21
Jan-22
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
May-23
Jul-23
Sep-23
Spain Italy

40. MONETARY POLICY SETS THE PACE
70
80
90
100
110
120
130
140
150
Q1
05
Q4
05
Q3
06
Q2
07
Q1
08
Q4
08
Q3
09
Q2
10
Q1
11
Q4
11
Q3
12
Q2
13
Q1
14
Q4
14
Q3
15
Q2
16
Q1
17
Q4
17
Q3
18
Q2
19
Q1
20
Q4
20
Q3
21
Q2
22
Q1
23
Q4
23*
Q3
24*
Yen per US$
1,2
1,3
1,4
1,5
1,6
1,7
1,8
1,9
2
Q1
05
Q4
05
Q3
06
Q2
07
Q1
08
Q4
08
Q3
09
Q2
10
Q1
11
Q4
11
Q3
12
Q2
13
Q1
14
Q4
14
Q3
15
Q2
16
Q1
17
Q4
17
Q3
18
Q2
19
Q1
20
Q4
20
Q3
21
Q2
22
Q1
23
Q4
23*
Q3
24*
US$ per Pound
0,9
1
1,1
1,2
1,3
1,4
1,5
1,6
Q1
05
Q4
05
Q3
06
Q2
07
Q1
08
Q4
08
Q3
09
Q2
10
Q1
11
Q4
11
Q3
12
Q2
13
Q1
14
Q4
14
Q3
15
Q2
16
Q1
17
Q4
17
Q3
18
Q2
19
Q1
20
Q4
20
Q3
21
Q2
22
Q1
23
Q4
23*
Q3
24*
$EEUU per €
Exchange rates - parity €/$
Euro recovers, but remains weak against the dollar
Source: Círculo de Empresarios based on Oxford Economics, 2023.
Quarterly €/$ exchange rate
40

41. MONETARY POLICY SETS THE PACE
Thank you