Perspectives Global and Spanish Economy G4 2019

Perspectives on
Global and Spanish Economy
Q4-2019
January 2020
QUARTERLY REPORT

Overview of the economic situation Q4-2019
3
Source: Círculo de Empresarios, 2020
The main international organisations (IMF, OECD, World Bank, and European Commission) warn of a global
economy in a synchronised slowdown against the backdrop of mounting uncertainty and new geopolitical
risks. Thus, the second half of 2019 has been marked by the outbreak of social protests and institutional
crises in Hong Kong and some Latin American countries such as Chile, Bolivia, and Colombia. Moreover,
there are risks and uncertainties associated with the US-China trade war, and the exit of the United
Kingdom from the EU, which, although evolve favourably, still have a significant impact on the global
economy.
In the advanced economies, signs of nearing the end of the expansion phase of the business cycle persist,
among which the most pronounced is the significant deterioration in industry and trade against a backdrop
of record low levels of unemployment. The US maintains its growth rate around 2% per year, although there is
some moderation in consumption, investment, and job creation. In the EU, Germany’s industrial weakness
has been particularly marked in the automotive sector.
In emerging economies, interest rate cuts by most central banks stand out, together with fiscal
consolidation processes (Brazil & China). However, there still are risks associated with high levels of debt and
the evolution of their growth & inflation rates.

Global economic trends 2019/20
4
Source: Círculo de Empresarios, 2020
Synchronised slowdown
International merchandise trade at
2009 levels
Inflation at 2013 levels
Accommodative monetary policy
90% of economies experience a slowdown in
their GDP
The WTO revises its growth forecasts down
to 1.2% in 2019
Price growth does not exceed 2% per year
in most advanced economies
The Fed cuts interest rates for the first time
in 11 years
Significant industrial deterioration
Eurozone industry is in a contraction phase
since the end of 2018
2
3
4
5
Social and geopolitical conflicts
globally
(Hong Kong, Iran, and Latin America)
6
1

Synchronized slowdown in global growth
Source: Círculo de Empresarios based on World Bank & IMF, 2020
5
The IMF forecasts that in 2019, global GDP growth will fall to its lowest rate since the beginning of the
decade (3%) and warns that the global economy is experiencing a synchronised slowdown
-2
0
2
4
6
Advanced economies Emerging economies World GDP
-6
-3
0
3
6
9
12
15
2007 2009 2011 2013 2015 2017 2019
China Japan UK
US Eurozone India
Evolution of world GDP
% change year-on-year; and contributions to growth
Synchronisation in economic growth
% change year-on-year

Eurozone
China
Source: Círculo de Empresarios based on IMF, 2020
6
2019 2020
Japan
UK
US Brazil
2019 2020
Argentina
Turkey
2019 2020
2019 2020
2019 2020
2019 2020
2019 2020
2019 2020
2.4 2.1
1.2 1,4
1.2 1.4
6.1 5.8
0.3 3
-3.1 -1.3
0.9 2.0
0.9 0.5
ADVANCED
2019 2020
1.7 1.7
EMERGING
2019 2020
3.9 4.6
Growth forecast
India
2019 2020
6.1 7
0.1
0
-1.2
2.8
-1.9
-0.2
-1.2
-0.1
-0.1
Revised forecast
April 2019 (pp)

Mounting political and trade uncertainty
Source: Círculo de Empresarios based on Caldara and Lacoviello & Policy Uncertainty, 2020
7
c
The US imposes tariffs on imports from China, the EU,
Canada, and Mexico
The EU and Canada retaliate and impose
tariffs on the US
A trade war truce is announced
between the US and China
The US increases tariffs by $200
billion on Chinese imports
The US creates a blacklist of
Chinese technology companies
US tariffs on European imports
400
300
200
100
0
50
Trade deal (US – China)
Apr
2018
Jun
2018
Dec
2018
Jan
2019
May
2019
Dec 2019
0
50
100
150
200
250
300
350
Sep-00
Sep-01
Sep-02
Sep-03
Sep-04
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Policy uncertainty
Trade uncertainty
Global Economic Policy Uncertainty Index
Index value
Major events of the trade war

Significant decline in world trade
Source: Círculo de Empresarios based on CPB World Trade Monitor & FMI, 2020
8
According to the CPB World Trade Monitor, between January and October, the volume of world trade dropped
at an average annual rate of 0.5%, compared with the 4.2% increase in the same period of 2018
This evolution is mainly explained by the negative contribution to the growth of world imports by China and other
countries in East Asia
-2
-1
0
1
2
3
4
5
6
Jun-12
Oct-12
Feb-13
Jun-13
Oct-13
Feb-14
Jun-14
Oct-14
Feb-15
Jun-15
Oct-15
Feb-16
Jun-16
Oct-16
Feb-17
Jun-17
Oct-17
Feb-18
Jun-18
Oct-18
Feb-19
Jun-19
Oct-19
YoY change MA(3 months)
Interquarterly change MA(3 months)
-2
0
2
4
6
8
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
North America
Eurozone
China
East Asia excluding China
Other emerging countries
UK
Rest of the world
Evolution of world trade
(%)
Contribution to the growth of world imports, by region
(pp)

Industrial decline and unemployment at record lows
The decline in world trade predominantly affects the manufacturing sector, especially in the US and
the Eurozone
Source: Círculo de Empresarios based on Oxford Economics, 2020 9
-4
-2
0
2
4
6
8
2014 2015 2016 2017 2018 2019
China Eurozone US World
1
3
5
7
9
11
13 Eurozone Japan US
All this in an environment in which the unemployment rate of the main advanced economies are kept
at historic lows
Evolution of manufacturing industry
Unemployment rate, major advanced economies
%

Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Ago-19 Sep-19 Oct-19 Nov-19 Dic-19
Germany 51.5 49.7 47.6 44.1 44.4 44.3 45 43.2 43.5 41.7 42.1 44.1 43.7
France 49.7 51.2 51.5 49.7 50 50.6 51.9 49.7 51.1 50.1 50.7 51.7 50.4
Italy 49.2 47.8 47.7 47.4 49.1 49.7 48.4 48.5 48.7 47.8 47.7 47.6 46.2
US 53.8 54.9 53 52.4 52.6 50.5 50.6 50.4 50.3 51.1 51.3 52.6 52.4
Spain 51.1 52.4 49.9 50.9 51.8 50.1 47.9 48.2 48.8 47.7 46.8 47.5 47.4
UK 54.2 52.8 52 55.1 53.1 49.4 48 48 47.4 48.3 49.6 48.9 47.5
Japan 52.6 50.3 48.9 49.2 50.2 49.8 49.3 49.4 49.3 48.9 48.4 48.9 48.4
China 49.4 49.5 49.2 50.5 50.1 49.4 49.4 49.7 49.5 49.8 49.3 50.2 50.2
India 53.2 53.9 54.3 52.6 51.8 52.7 52.1 52.5 51.4 51.4 50.6 51.2 52.7
Brazil 52.6 52.7 53.4 52.8 51.5 50.2 51 49.9 52.5 53.4 52.2 52.9 50.2
World 51.5 50.8 50.6 50.6 50.3 49.8 49.4 49.3 49.5 49.7 49.8 50.3 50.1
Global moderation of PMI’s in 2019
Source: Círculo de Empresarios based Markit, 2020
10
Economic sentiment worsens especially in the Eurozone, with the biggest variations in Italy
and Germany
Note: The JP Morgan Global Manufacturing PMI has been used to calculate the global data
67%oftheworldGDP
Manufacturing PMI
50=threshold (a value above 50 represents an expansion)

Globalisation 4.0: new business pattern
11
Globalisation 1.0
(s. XIX- 1914)
Globalisation2.0
(1945- 1989)
Globalisation 3.0
(1989- 2008)
Trade
Scientific
innovations
Textiles/
manufacturing
Industrial
products
Value
cains
Services
and digital
goodsSteam
machine and
Railroad
Car and
airplane
Computers
and Internet
Globalisation began to develop fully in the second half of the 19th century over three different phases, driven
mainly by technological advances, trade in goods, business investment, and integration processes
Globalisation 4.0
The great recession of 2008, the
economic boom of China, the
4th Industrial Revolution, and
the protectionism tensions mark
the beginning of the so-called
Globalisation 4.0
In this new phase, a new trade
pattern is configured in which
services gain prominence,
regionalisation increases and
labour cost arbitrage loses
relevance

China: growth moderation
Source: Círculo de Empresarios based on Oxford Economics, 2020
12
On the demand side, both private and public consumption
and net exports slow down
In Q3 2019, China's GDP increased by 6% year-on-year, its slowest pace in three decades,
forecasting it to gradually decline to around 5% annually in 2025
0
2
4
6
8
10
12
14
16
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2021
2023
2025
4
10
16
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Private consumption
Household disposable income
2018 2019 2020
Domestic demand 7.2 5.6 5.4
Private consumption 7.2 6.8 6.6
Investment 4.7 4 3.9
Public consumption 16.3 5.5 6.6
Exports of good and services 4.3 1.5 1.7
Imports of goods and services 6.5 -1.2 2.3
GDP 6.6 6.1 5.7
CPI average 2.1 2.8 3.2
Total trade balance ($ bn) 102.9 198.3 183.7
GDP
Household consumption and income
Forecasts by Oxford Economics

-4
-2
0
2
4
6
8
10
12
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
Primary and secondary transfers
Trade balance of services
Trade balance of goods
Current account
13
Forecast
In 2019, China's current account surplus hinted to a slight recovery, as imports dropped due to weak domestic
demand, although a reduction in the balance is forecasted in the coming years
In turn, the trade war with the US continues to negatively affect its exports
-40
-30
-20
-10
0
10
20
30
40
50
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Apr-18
Jul-18
Oct-18
Jan-19
Apr-19
Jul-19
Oct-19
Exports to US
Exports to the world
Exports to the world excluding the US
China: external sector in light of its changing production model
Current account balance
% of GDP
Exports of goods, China

Source: Círculo de Empresarios based on World Bank, IMF & Thomson Reuters, 2020
14
In Q3 2019, Hong Kong's GDP declined by 2.9% year-on-year, mainly due to dwindling private consumption
(-3.4% year-on-year). Forecasts point towards an economic stagnation for the rest of the year with a mere
0.3% GDP growth
0
20.000
40.000
60.000
China Hong Kong
1980 1995 2019
Currently, Hong Kong accounts for 2.7% of China's GDP
and its exports to China account for roughly 90% of its
GDP.
In terms of per capita income (PCI), Hong Kong fairs
considerably well in comparison with China, almost
three-fold
Note: Currently, Hong Kong's exports of goods and services represent 188.3% of its GDP
-3
0
3
Q1
2017
Q2
2017
Q3
2017
Q4
2017
Q1
2018
Q2
2018
Q3
2018
Q4
2018
Q1
2019
Q2
2019
Q3
2019
0
50
100
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
Exports from China to Hong Kong
Exports from Hong Kong to China
Hong Kong: social protests negatively impact the economy
Evolution of Real GDP
GDP per capita
PPP in $
Evolution of the external sector
% of GDP

Latin America: growth prospects
The growth forecasts of the Latin American economies for 2019 and 2020 have been revised
downwards in alignment with the global context of economic slowdown, uncertainty, decline in
commodity prices, and trade tensions
Source: Círculo de Empresarios based on IMF, 2020
0.2
1.8
2019 2020
0.9 2
0
1
2
3
4
2019 2020
2.5 3
2019 2020
-3.1
-1.3
-4
-2
0
2
4
2019 2020
0.4 1.3
2019 2020
0.4
2.3
2019 2020
Brazil
UruguayChile Peru
Colombia
3.4
3.6
2019 2020
Mexico
Argentina
2.6
3.6
0
1
2
3
4
2019 2020
LATAM
Current forecastPrevious forecast
15

Latin America: rising uncertainty
Source: Círculo de Empresarios based on Oxford Economics & BBVA Research, 2020
16
Uncertainty index
Points
Social conflicts 2019
Institutional fragility and the announcement of economic reforms have unexpectedly led to severe political and
social tensions, mainly in Chile, Colombia, and Bolivia
Level of economic and political risk
1 = low risk, 10 = high risk
0,0
0,2
0,4
0,6
0,8
Q1 2019 Q2 2019 Q3 2019 Average 2009-2019
Shortage of food and
medicine, and
hyperinflation
Social protests against
the Government
Electoral fraud
and resignation
of the President
Evo Morales
Social opposition to
new labour and
pension reform
Protests against
the fuel price
increase
Venezuela
Colombia
Ecuador
Peru
Chile
Bolivia
Government
institutional crisis
0
2
4
6
8
Economic risk Political risk

Latin America: inflation and currencies
17
Evolution of the CPI
Exchange rate against the dollar
January 2017 =100
0
2
4
6
8
2018
2019*
2020*
2018
2019*
2020*
2018
2019*
2020*
2018
2019*
2020*
2018
2019*
2020*
2018
2019*
2020*
0
10
20
30
40
50
60
2018
2019*
2020*
Argentina Brazil Mexico Chile Colombia Peru Uruguay
Range set as inflation target
The uncertainty in the markets has caused a greater depreciation of the main currencies, particularly
the evolution of the Argentine peso and the Brazilian real stand out.
Inflation remains within the target level of central banks in most Latin American countries, except in
Argentina
800
Argentine Peso (right axis)
Chilean Peso
Mexican Peso
Brazilian Real
Colombian Peso
Peruvian Sol

Argentina: recession and fiscal adjustment
Source: Círculo de Empresarios based on Oxford Economics & BBVA Research, 2020
18
Quarterly GDP
Argentina continues to be marred in recession, with forecasts of shrinking GDP of -3.1% in 2019
Public and primary deficit
% of GDP
Annual Fiscal Targets
% of GDP
Compliance with the fiscal target set for 2020 (primary
balance = 1% of GDP) will require an increase in taxes or
a greater adjustment of expenditure
0
4.3
-2.6
-6.4
-1.8
-0.1
-7
-5
-3
-1
1
3
5
-6
-5
-4
-3
-2
-1
0
2012 2013 2014 2015 2016 2017 2018 2019* 2020*
Public deficit Primary deficit
Total incomes Primary expenditure Primary balance
2016 19.8 24 -4.2
2017 18.8 22.6 -3.8
2018 17.8 20.1 -2.3
June 2019
(last 12 months)
18.5 19.7 -1.2
Target 2019 -0.5
Target 2020 1

Brazil: economic recovery and structural reforms
Source: Círculo de Empresarios based on Ministry of Economy (Brazil), Bloomberg & IMF, 2020
19
Growth of real GDP and its components
2014 = 100; and % change year-on-year
According to forecasts, in the next decade, the Social
Security reform in Brazil shall result in a fiscal saving to
the tune of $197 billion
Impact of pension reform on public debt
% of GDP
Brazil's economic recovery will be dependent on disentangling a host of cyclical factors (inflation control and
interest rate cuts), as well as by structural reforms such as Social Security
Despite the economic recovery, the main starting
points of domestic demand are still below the levels
prior to the 2014 recession
-6
-1
4
9
14
19
40
50
60
70
80
90
100
110
GDP (right axis) Investment
Consumption Private consumption
91.4
96
60
70
80
90
100
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Base scenario
With Social Security reform
Without Social Security reform

Source: Círculo de Empresarios based on Thomson Reuters, Fed & FRED St. Louis, 2020
US: economic expansion at a moderate pace
Real GDP growth
% ; and contributions to GDP growth (pp)
2021
2.1 2.0 1.8
20202019
20
The US economy marks the longest period of economic expansion in its history (124 months),
although at a more moderate pace
Fed real GDP forecasts
%
GDP growth and consecutive months of expansion
Average growth (%); and months in expansion
7,1
5
4,3
2,3
106
12
92
120
124
0
20
40
60
80
100
120
140
0
1
2
3
4
5
6
7
8
Annualized real GDP (%)
Months (right axis)
-2
0
2
4
6
2015 2016 2017 2018 2019
Consumption Investment Public expenditure
Net trade GDP

0
5
10
15
20
25
30
35
40
45
50
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Source: Círculo de Empresarios based on FED of NY and St Louis, Goldman Sachs & Bloomberg, 2020
21
US: the probability of recession decreases but
household consumption and investment deteriorates
Note: in the economic forecast survey of the Wall Street Journal (December 2019) the economists surveyed estimated a probability of 25.85%
Probability of a recession in the US
% (in the next 12 months)
Between January and September 2019, the growth in household consumption and investment slowed
down to 2.5% year-on-year average (vs 3.1% in previous year) and 2% (vs 4.5% in 2018 ), respectively
Recession probability
November 2020: 24.6%
Evolution of household consumption and investment
-1
0
1
2
3
4
-4
-2
0
2
4
6
8
10
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Investment Consumption (right axis)

Source: Círculo de Empresarios based on Thomson Reuters, 2020
22
US: good labour market behaviour
Job creation, non-farm payrolls
Thousands of jobs
Evolution of unemployment in the US
%
Job creation increases and the unemployment rate continues to be at the record lows of 1969
3
4
5
6
7
8
9
10
11
Jan-60
Jan-63
Jan-66
Jan-69
Jan-72
Jan-75
Jan-78
Jan-81
Jan-84
Jan-87
Jan-90
Jan-93
Jan-96
Jan-99
Jan-02
Jan-05
Jan-08
Jan-11
Jan-14
Jan-17
0
50
100
150
200
250
300
350
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
Jun-18
Aug-18
Oct-18
Dec-18
Feb-19
Apr-19
Jun-19
Aug-19
Oct-19
Employment growth MA (6 months)

-2
-1
0
1
2
3
4
5
2012 2013 2014 2015 2016 2017 2018 2019
Labour productivity Unit Labour Cost
Source: Círculo de Empresarios based on BEA, Focus Economics, St Louis Fed y Thomson Reuters, 2020
23
US: slight rise in inflation
In November, inflation exceeded 2% per year for the first time in the last 12 months, mainly due to the increase in
energy prices, although it remains below the core inflation (at 2.3% for the second consecutive month)
US inflation indicators
* Personal consumption expenditure; Fed benchmark at which the 2% target is set in the medium-term
Wages and labour costs
All this in an environment where the growth of unit labour costs exceeds 2% year-on-year and labour productivity
decreases to 1.5% year-on-year
-0,5
0
0,5
1
1,5
2
2,5
3
3,5
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
Jan-16
May-16
Sep-16
Jan-17
May-17
Sep-17
Jan-18
May-18
Sep-18
Jan-19
May-19
Sep-19
CPI Core CPI
General PCE* Inflation target

24
Changing course of the Fed's policy
Source: Círculo de Empresarios based on Bloomberg & Fed, 2020
In July, the Fed cut interest rates for the first time in 11 years, in a context of moderate inflation
and persistence of both national and international risks
Fed economic growth Outlook
Fed Balance sheet
$ billions
Fed official interest rate
%
0
1
2
3
4
5
QEI
QEII
QEIII
"Taper Talk"
Taper
In December, the Fed once
again increased its balance
above $4 billion
0
0,5
1
1,5
2
2,5
3
3,5
4
Q12010
Q32010
Q12011
Q32011
Q12012
Q32012
Q12013
Q32013
Q12014
Q32014
Q12015
Q32015
Q12016
Q32016
Q12017
Q32017
Q12018
Q32018
Q12019
Q32019
Q12020
Q32020
Interest rate swap 10 years Interest rate swap 5 years
Official interest rate
2019 2020 2021 Long-term
GDP 2.1 2 1.8 1.9
Last forecast 2.1 1.9 1.8 1.9
Unemployment rate 3.6 3.7 3.8 4.2
Last forecast 3.7 3.8 3.9 4.3
PCE inflation 1.5 1.9 2 2
Last forecast 1.8 2 2 2
Core CPI 1.8 1.9 2
Last forecast 2 2 2

-5
-4
-3
-2
-1
0
1
2
3
4
5
-1,5
-1,0
-0,5
0,0
0,5
1,0
1,5
Q1
2018
Q3
2018
Q1
2019
Q3
2019
-5
-4
-3
-2
-1
0
1
2
3
4
5
-1,5
-1,0
-0,5
0,0
0,5
1,0
1,5
Q1
2018
Q3
2018
Q1
2019
Q3
2019
-5
-4
-3
-2
-1
0
1
2
3
4
5
-1,5
-1,0
-0,5
0,0
0,5
1,0
1,5
Q1
2018
Q3
2018
Q1
2019
Q3
2019
Europe: the European Commission forecasts growth at
a moderate pace
Source: Círculo de Empresarios based on European Commission, 2020 25
In Q3 2019, the decline in the Eurozone industrial manufacturing sector intensifies to 2.2% annually
Growth forecasts for 2019
Evolution of Eurozone sector indicators
%
EU 28 Eurozone
20202019
Industrial
production
Construction Retail trade
volumes
The trade war, the slowdown in China, and the political uncertainty stemming from Brexit have
conditioned the economic prospects of the region in 2019
1.4
1.51.4 1.5
GDP CPI
1.1
1.21.2 1.2
GDP CPI
QoQ change (left axis) YoY change (left axis)

0
2
4
2015
2016
2017
2018
2019
2020
0
2
4
2015
2016
2017
2018
2019
2020
0
2
4
2015
2016
2017
2018
2019
2020
-1
0
1
2
3
2015
2016
2017
2018
2019
2020
0
2
4
2015
2016
2017
2018
2019
20200
2
4
2015
2016
2017
2018
2019
2020
Eurozone: economic slowdown
Source: Círculo de Empresarios based on Oxford Economics, IMF & Thomson Reuters, 2020
26
Growth in the Eurozone suffers as the main economic indicators deteriorate
Main leading indicators, Eurozone
Points
Eurozone
Economic growth in the Eurozone
France
Germany
Spain
Netherlands
Italy
Average growth 1995-2019
35
40
45
50
55
60
65
70
Mar-13
Jul-13
Nov-13
Mar-14
Jul-14
Nov-14
Mar-15
Jul-15
Nov-15
Mar-16
Jul-16
Nov-16
Mar-17
Jul-17
Nov-17
Mar-18
Jul-18
Nov-18
Mar-19
Jul-19
Nov-19
PMI manufacturing
PMI services
ZEW
EC ESI

Exports of goods
% change year-on-year (3-months MA)
Alemania: loss of dinamism
Source: Círculo de Empresarios based on Oxford Economics & Eurostat, 2020
27
Economic uncertainty and global slowdown condition German GDP growth
German exports to Turkey and the United Kingdom are the ones that suffered the greatest setbacks since the
end of 2018
Possible scenarios of German GDP growth Growth of real GDP by component
% change quarter-on-quarter; & contributions to growth (pp)
-0,5
0
0,5
1
1,5
2
2,5
3
2013 2014 2015 2016 2017 2018 2019 2020 2021
No deal Brexit
Rising trade tensions
Eurozone slowdown
Baseline
-0,5
0,5
1,5
2012 2013 2014 2015 2016 2017 2018 2019
Domestic demand External demand GDP
-40
-20
0
20
40
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Apr-18
Jul-18
Oct-18
Jan-19
Apr-19
Jul-19
China EU 28 UK Turkey US

-0,2
0,0
0,2
0,4
2012 2013 2014 2015 2016 2017 2018 2019
Industry Construction Public sector
Other services Employment
Germany: setback in industry
28
Among the main economies of the Eurozone, Germany has suffered the largest
industrial decline, mainly due to the deterioration of its automotive sector
Evolution of industrial production, Eurozone
Job creation by sectors
% change quarter-on-quarter; & contribution to total employment (pp)
Automotive sector production and IFO
% change quarter-on-quarter
-40
-20
0
20
40
2007 2009 2011 2013 2015 2017 2019
Automobile sector
IFO Business Expectation
-10
-5
0
5
10
15
20
-25
-20
-15
-10
-5
0
5
10
15
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
Difference (right axis)
Germany
Eurozone excluding Germany

-0,8
-0,5
-0,2
0,1
0,4
0,7
1,0
1,3
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Q42017
Q12018
Q22018
Q32018
Q42018
Q12019
Q22019
Q32019
Domestic demand
Stock
External demand
GDP
France maintains a stable growth rate
Source: Círculo de Empresarios based on Insee & Oxford Economics, 2020
29
In Q3 2019, France's GDP growth remained at an annual 1.4% due to the progress in domestic demand
on the back of the expansionary fiscal policy
Public deficit
% of GDP
In 2019, the fiscal deficit is expected to be above 3% of its GDP, although it will begin to reduce after 2020
Real GDP growth by component
% change quarter-on-quarter; & contributions to growth (pp)
-3,5
-3,0
-2,5
-2,0
-1,5
-1,0
-0,5
0,0
2017 2018 2019 2020 2021 2022
Fiscal target Oct-2017 Fiscal target Oct-2018
Fiscal target Oct-2019 Results and OE forecasts
Forecasts

The ECB upholds the monetary stimulus
30Source: Círculo de Empresarios based on ECB, 2020
In September 2019, in light of an economic slowdown, the ECB maintained official interest rates at 0% and
lowered the bank deposit facility rate to -0.5%
In November 2019, the ECB resumed the net
asset purchases at a rate of €20 billion per
month
Currently, the ECB's balance doubles that of
the Fed and represents 40% of the Eurozone's
GDP
ECB policy interest rate
%
Balance sheets of the main central banks
% of GDP
0
50
100
2007 2013 2018
BoJ ECB Fed
-1
0
1
2
3
4
5
6
7 Deposit rate
Marginal lending rate
Official interest rate

United Kingdom: general elections and Brexit
Source: Círculo de Empresarios based on Bloomberg & KU Leuven, 2020 31
Following the outcome of the elections in which the Conservative Party won, the British Parliament approved
on December 20, 2019 the withdrawal agreement bill to leave the EU which is planned for January 31, 2020
70,410
141,320
291,930 122,950
47,310
15,790
17.020 30,750
43,430
17,890
5,570
4,970139,140
50,330
19,970
9,080
2,710
440
7,430
16,900
73,200
42,390
9,720
526,830
Employment that would be affected
by a hard Brexit
No. of jobs
High impact Low impact
Election result December 2019
No. of seats
Variation relative to the 2017 elections
%
+1.2 -7.8 +0.8 +4.2
365 203
48 11
8
15
Conservatives Labour
SNP Liberal Democrat
Democratic Unionist Party Others
326 Seat
Majority

Evolution of Brent Spot Price
$ per barrel
Oil: new upward pressures
Source: Círculo de Empresarios based on EIA, 2020 32
In 2019, the price of a barrel of Brent soared by 34% to hit around $70, although it still remains far
from the record highs reached in October 2018
Upward pressures
2
1
Escalating political tensions between
the US and Iran
2
US–China trade war persists
1
OPEC production cuts
Downward pressures
However, the evolution of oil prices in the short- and
medium-term hinge on these causes as follows...
Global economic growth slumps
+34.0
-24.2
3 Future outcome of the US elections
50
55
60
65
70
75
80
85
90
2018 2019

Stock markets (I): exceed the pre-correction levels at the 2018
year-end collapse, in an environment of lower volatility
33Source: Círculo de Empresarios based on Bloomberg, 2020
World Stock Index (MSCI WORLD)
January 2018=100
VIX Volatility index
85
90
95
100
105
110
115
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
0
10
20
30
40
50
60
Jan-10
Aug-10
Mar-11
Oct-11
May-12
Dec-12
Jul-13
Feb-14
Sep-14
Apr-15
Nov-15
Jun-16
Jan-17
Aug-17
Mar-18
Oct-18
May-19
Dec-19

Stock markets (II): The world's main stock exchanges
are making great strides despite global risks
34Source: Círculo de Empresarios based on Bloomberg, 2020
Main stock market indices in the world
January 2018=100
Nasdaq +36.7%
S&P 500 +28.1%
Stoxx 600 +22.3%
Dow Jones +22.1%
Topix Japan +17.7%
75
85
95
105
115
125
135
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
S&P500 Topix Stoxx 600 Nasdaq Dow Jones
Ultra-expansionary monetary policy measures by
the main central banks (Fed and ECB) have had a
significant impact on the stock markets, especially
in the last part of the year
Increase in share price since January 2019

35Source: Círculo de Empresarios based on Thomson Reuters, 2020
Stock markets (III): worse stock market behaviour in Europe
Banks were already struggling with margin pressures and then the ECB lowered the bank deposit facility
rate, both of which continue to hamper the share price and profitability of the European banking sector
Stock market evolution of the banking sector
January 2016=100
Return on Assets (ROA)
%
Note: Currently, the ECB deposit facility rates are at negative levels, around -0.5%
-0,5
0
0,5
1
1,5
2
Eurozone US UK
60
80
100
120
140
160
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
May-18
Jul-18
Sep-18
Nov-18
Jan-19
Mar-19
May-19
Jul-19
Sep-19
Nov-19
S&P 500 banks
EUROSTOXX banks

2.6
1.6 1.5
0.8
0.6
-0.1 -0.1
-0.6
-1.8-2
-1
0
1
2
3
36Source: Círculo de Empresarios based on Thomson Reuters, 2020
Fixed income: inverted US Treasury yield curve
The end of the business cycle keeps the 10-year bond yield at a minimum, especially in Germany
and Japan
10-year Treasury yield, US, Germany, & Japan
%
2-year Treasury yield, main economies
%
The persistence of negative
rates in the short-end of the
European curves stands out
-0,8
-0,6
-0,4
-0,2
0
0,2
0,4
0,6
0,8
1
1,3
1,6
1,9
2,2
2,5
2,8
3,1
3,4
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
US (left axis) Germany (right axis) Japan (right axis)

38
Executive Summary
In 2019, the Spanish economy will expand by 2% annually according to the Bank of Spain forecasts, which is
0.4pp less than in 2018, in an environment of economic, political and institutional instability and reformist
paralysis. Although Spain continues to lead the growth among the major European economies with a 1.9%
year-on-year in Q3 2019 compared to 1.2% on average in the Eurozone, the OECD has warned that our situation
is deteriorating at a faster pace than anywhere else in the monetary union.
This slowdown in the Spanish economy is mainly explained by the loss of dynamism in domestic demand and
INE’s revision of the historical GDP series. Private consumption has dwindled, and investment has diminished in
light of the worsening economic outlook and waning business confidence. In contrast, public spending, with a
carried over General State Budget (PGE 2018), continues to increase as a result of the measures approved by
the former incumbent Government through Royal Decree-Law marking another year wasted in terms of fiscal
consolidation. In turn, external demand has a weak contribution to GDP growth.
In this context, the Spanish economy manifests risks in the medium-term, given that the global economy is in a
synchronised slowdown, the tariffs imposed by the US, the persistence of high levels of unemployment, and high
public deficit & debt, all of which combined, reduce the margin of fiscal policy in the event of a possible new
recession, especially at a time when the effectiveness of the monetary policy of the ECB is in doubt.

39
Risks
• Persistence of unemployment, especially youth and long-term, and duality in the labour market
• Decline in productivity and competitiveness
• Indetermination about the future orientation of economic policies and the budget consolidation process in
light of the new configuration of the Government against a backdrop of rising territorial political tensions
• Limited leeway to manoeuvre the European monetary policy and the Spanish fiscal policy in the wake
of a possible recession
• Impact of the US-China trade war and the new tariffs imposed by the US on the European Union and
specifically on Spain. According to the Bank of Spain, the latest protectionism of the US and China will shrink
Spain’s GDP by 0.2pp
• Uncertainty about the final impact of Brexit
• High levels of public deficit & debt, made worse by the expansion of public spending through Royal Decree-
Law (RDL) and the lack of a General State Budget (PGE), which delay the necessary fiscal consolidation
• Population ageing and its impact on the sustainability of the welfare state
• Deterioration of the economic situation in the major European economies
• Impact of the energy and environmental transition

40
2019*2018
* Forecast
Source: Círculo de Empresarios based on The Bank of Spain and FUNCAS, 2020
The main international and national organisations have revised down their growth forecasts for 2019 from 2.2%-2.4%
annually that they forecasted in the first half of 2019 to 1.8%-2.1% annually. This trend would place the progress of
the Spanish economy between 1.5% and 1.8% in 2020, hinged on the political and economic context both
nationally and globally
The growth deceleration of the Spanish economy is
confirmed
2.4% 2%
2020*
1.7%
Bank of Spain forecasts (Dec. 2019)
The OECD and the analysts’ consensus (FUNCAS) forecasts a growth of 2% for 2019 and 1.6% for 2020, which is
0.1pp and 0.2pp below the government forecast

Greater contribution of domestic demand…
Source: Círculo de Empresarios based on The Bank of Spain, ECB, & INE, 2020 41
GDP and contribution of domestic & external demand
% change YoY & pp The GDP increased by 0.4%
quarterly and 1.9% year-on-
year, which are similar rates to
the previous quarter, and the
lowest since 2014
Comparing Q3 2019 to Q2 2019, we can observe that the contribution of domestic demand to year-on-
year GDP growth has increased by 0.6pp to hit 1.8 percentage points. On the other hand, the contribution
of external demand has decreased its contribution by 0.7pp to hit 0.1pp
The year-on-year growth of the
Spanish economy exceeds that
of the Eurozone by 0.7pp (1.2%)
3.2
3.9 4
4.2
3.7
3 3
2.5 2.5
3.2
2.8
3
2.8
2.3 2.2 2.1 2.2
2 1,9 2
1.8
2 2 2 2
1.8 1.8
2.1 2.1
2.5
2.8 2.7
2.4
2.2
1.7
1.2
1.3
1.2 1.1 1.1
-1
0
1
2
3
4
5
1Q2015
2Q2015
3Q2015
4Q2015
1Q2016
2Q2016
3Q2016
4Q2016
1Q2017
2Q2017
3Q2017
4Q2017
1Q2018
2Q2018
3Q2018
4Q2018
1Q2019
2Q2019
3Q2019
2019*
Spain´s domestic demand Spain´s external demand
Spain´s GDP Eurozone GDP
* Bank of Spain and OECD forecasts

...although it shows clear signs of slowdown in an
environment rife with uncertainty
Source: Círculo de Empresarios based on INE, 2020 42
• The final consumption of the public
administrations continues to soar at
2.2% year-on-year
• Investment regains dynamism and
grows at 2.8% year-on-year after its
deceleration to 1.5% in Q2 2019,
although it is 3.3pp below the Q3 2018
figure
• Household consumption recovers to
1.4% year-on-year, compared with
the 0.8% in Q2 2019
Evolution of the main components of domestic demand and savings
% change year-on-year; and % Gross disposable household income
In Q3 2019
• The household saving rate stood at
6.4% of their gross disposable
household income (GDHI) in Q3 2019,
which is 1pp higher than the one
recorded a year earlier
4,0
4,5
5,0
5,5
6,0
6,5
7,0
7,5
8,0
8,5
-2,0
0,0
2,0
4,0
6,0
8,0
10,0
12,0
2014Q1
2014Q2
2014Q3
2014Q4
2015Q1
2015Q2
2015Q3
2015Q4
2016Q1
2016Q2
2016Q3
2016Q4
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3
2018Q4
2019Q1
2019Q2
2019Q3
Households consumption (left axis)
Public consumption (left axis)
Investment (left axis)
Savings rate (right axis)
%
Change year on year
% GDHI

PMIs in decline
43Source: Círculo de Empresarios based on Markit, 2020
Spain PMIs
A reading above 50 indicates an expansion of the manufacturing/services sector compared
to the previous month; below 50 represents a contraction; while 50 indicates no change
Moderately wilting PMIs confirm the deceleration of the Spanish economy in 2019
The services PMI recovers to 54.9
points
In December, the manufacturing
PMI was below 50 points for a
seventh month in succession, and
reports its worst value since 2013
47.4
54.9
40
45
50
55
60
Apr-13
Sep-13
Feb-14
Jul-14
Dec-14
May-15
Oct-15
Mar-16
Aug-16
Jan-17
Jun-17
Nov-17
Apr-18
Sep-18
Feb-19
Jul-19
Dec-19
Manufacturing PMI
Services PMI
Economic
expansion
Economic
contraction

End of the upward cycle in real estate
44
In October, the purchase and sale of
homes decreased by 1.5% year-on-year,
to a total of 42,825 operations
• ▼ pre-owned homes operations were
down by 1.8%, to a total of 34,897
• ▼ purchase and sale of new homes
were down by 0.1%, to a total of 7,928
Evolution of registered homes (new and pre-owned)
% change year-on-year for the period of Jan-Oct; and number of homes
Between January and October 2019, home sales fell by 3% year-on-year, the first negative record after
five years of growth, mainly due to the drop of 1.8% in operations in the pre-owned housing market
(81.6% of the total), compared to the mere drop of 0.1% in new housing operations
Source: Círculo de Empresarios based on INE, 2020
-28.1
-27.1
8.8
-17.6
-10.2
-1
2.9
11.9
14.6 15.7
12.7
-3
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
-35,0
-30,0
-25,0
-20,0
-15,0
-10,0
-5,0
0,0
5,0
10,0
15,0
20,0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Pre-owned homes (right axis)
New homes (right axis)
% change year-on-year for the period of Jan-Oct (left axis)%
Number
of homes

45
* Forecasts by The Bank of Spain
Source: Círculo de Empresarios based on the Ministry of Labour, Migrations & Social Security, the Bank of Spain & INE (Labour Force Survey), 2020
Evolution of S.S. affiliation and registered unemployment
People (December) and % change year-on-year Dec-to-Dec
Slowdown in job creation and unemployment
reduction
Evolution of employed, unemployed, & unemployment rate
LFS Q3 2019
% change year-on-year; and % of active population
In Q3, the unemployment rate stood at 13.9% of the active
population, which is 5.9pp above the pre-crisis levels (Q3 2007)
In October, according to Eurostat, the unemployment rate
increased to 14.2% active population
In December, the year-on-year correction of unemployment
(-1.2%) has been the lowest since 2013. Job creation also
slows down to 2%, which is 1.4pp below the peak reached in
2017
25.9
13.9
14.1
13.2
2.8 2.8 3.2
1.8 1.8
1.3
-14.4
-12.3
-3.4
0
5
10
15
20
25
30
-16
-14
-12
-10
-8
-6
-4
-2
0
2
4
2013Q4
2014Q1
2014Q2
2014Q3
2014Q4
2015Q1
2015Q2
2015Q3
2015Q4
2016Q1
2016Q2
2016Q3
2016Q4
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3
2018Q4
2019Q1
2019Q2
2019Q3
2019*
2020*
Unemployment rate (right axis)
Employment creation (left axis)
Reduction in unemployment (left axis)
%year-on-yearchange
%activepopulation
-5.4
-8
-9.5
-7.8
-6.2
-1.2
2.6
3.2 3.1 3.4 3.1
2
-12
-10
-8
-6
-4
-2
0
2
4
0
5000000
10000000
15000000
20000000
25000000
2008 2014 2015 2016 2017 2018 2019
Unemployed (left axis)
Affiliates (left axis)
Unemployment year-on-year change (right axis)
Affiliates year-on-year change (right axis)
People %

46
Evolution of the usage rate of temporary contracts
% 4-month moving average
Proliferation in the use of temporary employment
contracts in the Public Administrations
Currently, the total usage rate of
temporary employment contracts in
the Spanish economy stands at
26.7%, which is 4.7pp higher than the
record low hit in Q4 2012
In Q3 2019, for the second consecutive quarter, the use of temporary employment contracts in the
public sector exceeded that of the private sector, reversing the trend of the last 9 years
In Spain, the public sector employs
3.2 million people, which is 16.3% of
the total (19.9 million people)
Temporary employment contracts in
the public sector rise to 27.8% of the
total employed, which is 1.4pp above
that of the private sector (26.4%)
Source: Círculo de Empresarios based on INE, 2020
18
20
22
24
26
28
30
32
34
36
2008Q1
2008Q3
2009Q1
2009Q3
2010Q1
2010Q3
2011Q1
2011Q3
2012Q1
2012Q3
2013Q1
2013Q3
2014Q1
2014Q3
2015Q1
2015Q3
2016Q1
2016Q3
2017Q1
2017Q3
2018Q1
2018Q3
2019Q1
2019Q3
Total Public Private

Spain maintains the second-highest unemployment
rate in the EU
47
In October, the Spanish unemployment rate was 14.2%, 6.7pp above the for the Eurozone (7.5%)
Unemployment rate UE 28, October 2019
% of the active population
Unemployment rate — young people aged under 25 years
October; % of active population aged under 25 years
Source: Círculo de Empresarios based on Eurostat, 2020
16.7
14.2
9.7
8.5
7.5
6.5 6.3
4.8
3.8 3.5 3.1
32.5 32.8
27.8
19 18.3
15.6 15.5 14.4
12.2 11.4
5.8
7.3
0
10
20
30
40
50
60
2008 2014 2019

48
Another year wasted in terms of fiscal consolidation
Source: Círculo de Empresarios based on the Bank of Spain and the European Commission, 2020
The European Commission forecasts a public deficit of 2.3% of GDP for 2019 and a
debt-to-GDP ratio of 96.7%
Public debt and deficit
% of GDP
Public deficit by level of Public Administrations
% of GDP
In October, the Public Administration debt reached 1.19
trillion euros (96.7% of GDP)
The Social Security deficit accounts for 57% of the
total deficit of the Public Administrations
-12
-10
-8
-6
-4
-2
0
2
4
0
20
40
60
80
100
120
140
2007 2011 2015 2019
Public debt (left axis)
Public balance (right axis)
Forecasts
European
Commission
-1.2
-3
-1.3
-0.5
-1.7
-0.3
0.1
-0.5
0.50.5 0.7
-1.4
-1.2
-4.6
-2.5
2000 2008 2018
Central
Government
Autonomous
Regions
Local
Authorities
Social Security
Total

49Source: Círculo de Empresarios based on the Ministry of Labour, Migrations & Social Security, the Bank of Spain, and the European Commission, 2020
Affiliates-to-pensioners ratio
Since 2007, the affiliate-to-pensioner ratio in Spain has
worsened, falling from 2.71 affiliates for each
pensioner to 2.31 at present, with the forecast that in
2050 it will be at 1.26 (European Commission)
...affecting the sustainability of the Welfare State
Forecast of pension expenditure evolution
% of GDP
The Bank of Spain forecasts that linking pensions to
the CPI again could increase expenditure by
approximately 2pp of GDP in 2030 and by more than
3pp in 2050
2.39
2.06
2.71
2.31
2
2,1
2,2
2,3
2,4
2,5
2,6
2,7
2,8
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Dec-19
Forecasts
2030:2
2050:1.26
9
10
11
12
13
14
15
16
17
Base scenario Budget 2018 and CPI adjusted

50
Source: Círculo de Empresarios based on Eurostat, 2020
Expenditure on social protection in the EU28
Top 5 countries with the highest share
of social protection expenditure
% of GDP
Spain comes in the 12th position according to the social protection expenditure-to-GDP ratio
EU
27.9%
Social protection expenditure
% of GDP
Distribution of social protection expenditure
in the EU28 and in Spain
% of total expenditure on social protection
51.6
45.8
33.8
37.1
0% 20% 40% 60% 80% 100%
Spain
EU28
Old age and survivors Sickness/healthcare and disability
Unemployment Family/children
Housing and social exclusion
32.2
30.6 29.7 29.4 29.3
28.7
27.9
25.7
23.4
2012 2017
EU28
Spain

51Source: Círculo de Empresarios based on INE & Eurostat, 2020
The Spanish economy maintains favourable
competitiveness via prices with the Eurozone
In December, the price evolution
recovered, with an annual CPI
percent change rate of 0.8%,
standing 0.5pp below the annual
Eurozone average (1.3%)
This evolution is mainly explained
by the increase in fuel prices
Price evolution
0.8
1.3
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
Jun-18
Aug-18
Oct-18
Dec-18
Feb-19
Apr-19
Jun-19
Aug-19
Oct-19
Dec-19
Spain CPI Spain core CPI* Eurozone CPI
*GeneralIndex without unprocessedfoodandenergyproducts

Imports
Capital goods
Chemical goods
Energy goods
Exports
Capital goods
Food, beverages and
tobacco
Automobile
52
Balance of trade, January – October 2019
Change with respect to the same period of the previous year
Source: Círculo de Empresarios based on the Ministry of Industry, Trade & Tourism, 2020
The external sector reduces its contribution to growth
Exports ▲ 1.6% €242.5 bn
Imports ▲ 1.5% €270.5 bn
BALANCE = 0% - €28 bn
Energy deficit ▼7.9%
Sectorial distribution, January – October 2019
% of the total
20.3
16.5
15.3
21.2
16
13.7
Evolution of trade in goods
% of GDP
* Last 12 months, from October 2018 to October 2019
GDP based on the growth forecast for 2019 by The Bank of Spain = 2.2% and a CPI of 0.8%
The lower dynamism of Spanish exports is mainly explained by the escalation of the trade war,
the slowdown in the Eurozone, especially in Germany, and the impact of Brexit
Geographical distribution, January – October 2019
% of the total
17.3
20.1 21.7 23 23.2 23.1 22.9 23.7 23.6 23.322.2
24.6 24.8 24.6 25.6 25.4 24.5 25.9 26.5 26
-4.9 -4.5
-3.1
-1.6 -2.4 -2.3
-1.6
-2.3 -2.8
-2.7
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*
Exports Imports Balance
Exports Imports
Europe 71.5 59.4
EU 65.9 53.3
Germany 10.8 12.4
France 15 10.3
Italy 8 6.4
UK 6.9 3.6
America 10.8 10.6
Asia 9.1 21.2
China 2.3 9.1
Africa 6.5 8.4
Other 2.1 0.4

0
5000
10000
15000
20000
25000
30000
35000
40000
45000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
2nd 1st
3rd
Setback in FDI between January and September 2019
53Source: Círculo de Empresarios based on Datainvex, 2020
Between January and September 2019, gross flows of FDI received in Spain dropped by 61.4% year-on-year to €14.8
billion (1.6% of GDP)
Spain FDI flows abroad plummeted by 58.7% to €8.1 billion (0.87% of GDP) and were mainly directed to the EU and
Latin America (72.1% of total Spanish FDI), and only 10% to Asia and Africa
59% of the total FDI
received by Spain
comes from the EU28
Origin
Destination
Madrid
65.6% of the total
Castile and Leon
11.6% of the total
FDI flows received in Spain
€ millions
▼ 61.4%
Catalonia
11.5% of the total

90 M 82.8 M 80 M
62.9 M
54
International tourist arrivals
Source: Círculo de Empresarios based on Deloitte & INE, 2020
1,404 1.4 10%
1/10
GDP
jobs
trilliondollarsin
touristspending
+4%change
2017
millionsofinternational
touristarrivals
+6.1%change2017
Forecast 2019
+3% - 4%
82.8
millionsofinternational
touristarrivals
+1.1%change2017
89,751
milliondollarsin
touristspending
+5.5% change
2017Forecast 2019
11.7%
1.3/10
GDP
jobs
Spain
1st
2nd
3rd
4th Most visited
countriesin
the world
World

Competitiveness of the Spanish economy — Tourism
55
Source: Círculo de Empresarios based on the World Economic Forum (WEF), 2020
Profile of Spain in the Travel & Tourism Competitiveness Index 2019 by the WEF
Ranking and score
1º/140 countries
Spain's main strengths are concentrated in transport and service infrastructures, natural resources and
cultural resources and business travel tourism

Diversification of the countries of origin of tourism
Source: Círculo de Empresarios based on Frontur & INE, 2020
56
Distribution of tourist arrivals by countries of origin
% of total arrivals
27.4 22.4
21
13.8
14
13.6
5.9
7
5
5.3
19.4
22.6
2.3
3.6
2.1
4.1
3
7.7
2001 2018
AMÉRICA
EUROPA

Company formation slows down
57
Source: Círculo de Empresarios based on the Business demography statistics by the INE, 2020
Company formation, January-October 2019
Quantity and % change year-on-year
Distribution of company formation by Autonomous Community
Accumulated January-February
% of national total; and % change year-on-year
79,515 new companies were formed in Spain between January and October 2019, which is 1% fewer than in
the same period of the previous year
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
50000
55000
60000
65000
70000
75000
80000
85000
90000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Companies incorporated (left axis)
% year-on-year change (right axis)
nº %
23.1
19.3
16.5
11.7
4
3.6 3.3
3.3 3 2.9
2.6
2.1
1.2 1.2 0.9 0.7 0.5
0.5
3.5
-3.2
-1.3
-4.9
-6.5
-9.3
0.1
1.4
-2.9
-7.3
-4.2 -3.6
3
-4.6
-10
11.4
-15
-10
-5
0
5
10
15
0
5
10
15
20
25 New companies (% total)
% year-on-year change (right axis)

Risk Premium on a downward trend
58Source: Círculo de Empresarios based on Reuters & Bloomberg, 2020
The risk premium is below 100 bp, and is moving away from the Italian risk premium,
but is converging with that of Portugal
Risk premiums from Spain, Portugal and Italy
compared with the 10-year German bond
bp
Evolution of Spain’s rating
2010-2019
50
100
150
200
250
300
350
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Spain Italy Portugal
Jan-10
Aug-10
Mar-11
Oct-11
May-12
Dec-12
Jul-13
Feb-14
Sep-14
Apr-15
Nov-15
Jun-16
Jan-17
Aug-17
Mar-18
Oct-18
May-19
Dec-19
Moody´s S&P FitchAaa AAA
AA+
AA
AA-
Aa1
Aa2
Aa3
A+
A
A-
A1
A2
A3
BBB+
BBB
BBB-
Baa1
Baa2
Baa3
Rating

80
85
90
95
100
105
110
115
120
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Oct-19
Nov-19
Dec-19
S&P 500 Eurostoxx 50 IBEX 35
59Source: Círculo de Empresarios based on Reuters, 2020
Financial markets
Evolution stock market
January 2018=100
Since the beginning of the year, the difference in returns acquired from the IBEX 35 relative to the
main indices (S&P 500 and the Eurostoxx 50) has widened
Eurostoxx 50 +36.7%
S&P500 +28.1%
IBEX35 +12.2%
Increase in share price since January 2019

Competitiveness of the Spanish economy
Source: Círculo de Empresarios based on the World Economic Forum (WEF), 2020
60
Evolution of Spain's position in the ranking
Position
28th
7th
19th
43rd
1st
37th34th
61st
26th
15th
34th
25th
23rd
Institution
Infrastructure
ICT adoption
Macroeconomic
stability
Health
SkillsProduct market
Labour market
Financial system
Market size
Business dynamism
Innovation capability
Spain's position in each pillar of the ranking, 2019
141 countries
Enabling environment Human capital
Markets Innovation ecosystem
29th
26th
33rd
32nd
34th
26th
23rd
2007 2011 2015 2016 2017 2018 2019
Methodological
change
Spain still has weaknesses in:
Labour market
Macroeconomic stability
Skills
Business dynamism

www.circulodeempresarios.org
The Quarterly Report is a publication of the "Círculo de Empresarios" produced by its Department of Economics, which contains information and opinions from reliable sources. The "Círculo de
Empresarios" does not guarantee its accuracy or take any responsibility for any errors or omissions contained therein. This document is intended for informational purposes only. Therefore, under no
circumstances shall the "Círculo de Empresarios“ be liable for any uses made of the publication. The opinions and forecasts of the Department are subject to change without prior notice.

Perspectives Global and Spanish Economy G4 2019

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