Economic and Financial Review of Government of Extremadura
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Economic and financial review of Government of Extremadura Presentation to investors October 2014 Extremadura in Europe Communication hub between Spain and Portugal Extremadura is situated to the southwest of Spain, bordering with Castilla y León in the north, Castilla- La Mancha to the east, Andalusia to the south and with Portugal to the west. Extremadura Spain Population density (inhabitants/km2) 26 92 Area population 41,635 505,963 Population (1 Jan 2014) 1,097,743 46,725,164 Presentation to investors 2 Extemadura’s economy in focus The change in the GDP´s trend is consolidating in 2014 Since 2002, Extremadura’s economic growth has been above the national average and that of the European Union, with an average differential between 2002 and 2008 of 0.2 versus Spain and 1.1 versus the Union as a whole. In 2013 Extremadura has started a change in the GDP´s trend that is consolidating in 2014. The economic scenario is optimistic and in 2014 the GDP trend is expected to be positive as a result of the good performance of economic indexes during the last months. GDP growth Growth differential of Extremadura regarding (% YOY change at constant prices) Spain and the EU (%) 5 3,0 4 Ext vs. España Ext vs UE 3 2,0 2 1,0 1 0 0,0 -1 -2 Extremadura -1,0 España -3 UE-28 -2,0 -4 -5 -3,0 2002 2009 2003 2004 2005 2006 2007 2008 2010 2011 2012 2013 2007 2002 2003 2004 2005 2006 2008 2009 2010 2011 2012 2013 Source: INE, Eurostat Source: INE Presentation to investors 3 Extemadura’s economy in focus The service sector leads the productive structure in Extremadura GDP evolution by components 2013 Structure of GVA (% total), 2013 (% YOY change at constant prices) Extremadura Act. Leisure Public Sector Agriculture Profesionales 4% 30% 6% Industry 5% 13% 2 1,1 Extremadura Spain 0,9 1 Extremadura 0 -0,2 -1 -0,2 -0,3 -0,2-0,2 0,0 Real -0,9 -0,6 -0,7 Estate -2 -0,7 -1,2 -1,1 -1,1 -0,9 -1,2 -1,4 6% Finance Construcción -3 4% 12% -4 -3,3 -3,3 Communications Trade -5 20% -6 2% -7 -8 -7,4 -7,7 -9 Spain Public Sector GDP Professional Trade act. 18% Leisure Leisure Industry Finance Real Estate 8% 4% Agriculture Agriculture 3% Real Estate 8% Construction Public Sector Public Spain Communications Industry Professional activities Professional 17% Finance 4% Trade Construction Communications 26% 4% 8% Source: INE Source: INE The production structure of Extremadura is distinguished by a greater weight of the entire agricultural sector in comparison with Spain, involving about 6% of regional GVA in 2013. The sectors which have affected more negatively in the GDP of the region in 2013 were Construction (-7.4% inter-annual), Industry (-3.3% inter-annual) and Trade (-0.9% inter-annual). The public sector was the only activity which contributed positively with the GDP (+0,9% inter-annual). Presentation to investors 4 Extemadura’s economy in focus External demand continues to contribute positively to GDP growth, due to the good behavior of tourism and the trade balance Guest in hotels Exports and imports in Extremadura (Average annual rate) (accumulated 12 months) 25% Saldo comercial (eje dcha) Imports Exports España Extremadura 60% 1.500 20% 50% 15% 40% 1.000 10% 30% 5% 20% 500 0% 10% -5% 0% 0 -10% -10% -15% -20% -500 -20% -30% -25% -40% -1.000 dic.-07 dic.-08 dic.-09 dic.-10 dic.-11 dic.-12 dic.-13 jun.-10 jun.-07 jun.-08 jun.-09 jun.-11 jun.-12 jun.-13 jun.-14 jun.-10 jun.-13 jun.-07 jun.-08 jun.-09 jun.-11 jun.-12 jun.-14 Source: INE Source: DG Aduanas and IIEE The number of passengers and guests in hotels dropped in 2012 and 2013 after Extremadura reached the peak in 2011 with 1.2 million people. Better news for 2014, while the number of travelers in June increased 8% comparing with last year exercise. Improvement of the number of exports during the last year. In June 2014 its trade balance achieved 567 million euros (accumulated 12 months). This balance has been decreasing since its maximum (741 million euros) registered at the beginning of 2013 due to the increasing of imports. Presentation to investors 5 Extemadura’s economy in focus Unemployment rate above 29% and negative price differential Unemployment rate Inflation (%) (% YOY change CPI index and differential of Extremadura regarding Spain) 6% 0,9% Differential Extremadura 4% 0,6% 2% 0,3% Differential YOY YOY change 0% 0,0% -2% -0,3% dic.-07 dic.-08 dic.-09 dic.-10 dic.-11 dic.-12 dic.-13 jun.-10 jun.-08 jun.-09 jun.-11 jun.-12 jun.-13 jun.-14 jun.-07 Source: INE Source: INE With more than 148,000 unemployed in 2Q14, Extremadura’s unemployment rate rises to 29.4%, higher than the national average (24.5%). However, the job market in the region is blooming stronger than the rest of the country. On the contrary of Spain, Extremadura is registering positive inter-annual employment rates since last December. Inflation has been declining throughout the last year, reaching the negative zone. Presentation to investors 6 Extremadura in the context of Spanish Public Sector Expenditure powers assignment by level of Government. The Government of Extremadura is one of GRAPHIC 1. Levels of Government in Spanish Public Sector and powers assignment seventeen regional EXCLUSIVELY RESERVED POWERS: - Defence and Armed Forces governments existing in CENTRAL PUBLIC SECTOR - Foreign Affairs Spain. Like other - Justice Management - Commercial Law, Prison, Criminal, Labour and Civil regional governments, it Central Administration - Basic rules about healthcare and education. - Public investment of general interest and transport that runs through has extensive legislative more than a region. and executive Social Security Administration Management of assistance and social benefits in situations of need, implementation Specially unemployment. regarding essential LIST OF ASSUMED POWERS*: public services: REGIONAL PUBLIC SECTOR - Legislative development and management of healthcare and education - Social Services healthcare, education - Agriculture and cattle raising Autonomous Communities - Public Investment of interest for the region. and social welfare. (17) - Transport that only runs through the region Management thereof is - Regional economic development. Provincial ASSIGNED POWERS: the main destination of LOCAL Councils - Water supply and lighting. its total expenses: 68% of PUBLIC (51) - Paving, parks and gardening. SECTOR - Traffic management in urban roads. its budget – excluded Municipalities - Public passenger transport (8.115) - Civil defence and fire fighters. CAP and refinancing in - Housing development and management . the year. * Non- exhaustive list. Source: AFI Presentation to investors 7 Extremadura in the context of Spanish Public Sector The regional public sector from an economic viewpoint . Porcentage allocation of non financial expenditure between Spanish Public Deficit by level of government in Spain Administracion (%) (% on GDP) 2013. Estimated figure 2011(f) Central Social Security Autonomous Local public Local public Central Administration Administration Communities sector sector; 12.3% Administration; -4.81% 21.6% -5% -4% -3% -1.54% -2% -1.16% Autonomous -1% Communities; Social Security 34.3% Administration; 0% 31.9% 0.41% 1% Source: Ministry of Finance and Public Administration (f) forecast Source: Ministry of Finance and Public Administration Decentralization of Spain's Public Administration is apparent in the light of the data on distribution of public Allocation of public debt by level of government in Spain expenditure among different levels of government: December 2013 situation (% on total public debt) autonomous communities manage approximately 34% of 80% total public expenditure. 60% Despite the autonomic deficit in 2013 was 1.54% of 74.8% 40% GDP (only 21% of the Spanish public deficit), the debt 0,26% Junta de Extremadura 20% of the autonomous communities is around 20.8% of 21.0% 4.2% 0% total outstanding public debt (20.2% of GDP), which is Central Autonomous Local Public a manageable level for any economy. Extremadura Administration Communities Sector Source: Bank of Spain only represents 0,26% of total public debt. Note: Total PP.AA. excluded Social Security Administrations Presentation to investors 8 Extremadura in the context of Spanish Public Sector Control and coordination of Autonomous Communities debts Spain has highly developed legislation that ensures fiscal discipline of Autonomous Communities. In fact, the State is able to: 1. Monthly monitoring individualised annual budget stability targets. Autonomous Communities may only exceed these targets if they submit a Medium-term economic-financial rebalancing plan to incorporate corrective income and expenditure measures to ensure a return to budgetary balance. If they have already submitted it, they must approve additional measures. 2. Setting individualized annual budget stability targets. Given the current economic-financial situation, all the Autonomous Communities can incur a maximum deficit of 1% of GDP in 2014, 0.7% in 2015, 0.3% in 2016 y 0% in 2017. Moreover, annual debt targets for all Autonomous Communities have been set: 21.1% in 2014; 21.5% in 2015; 21.3% in 2016 and 20.6% in 2017. 3. Approval of debt issues and currency operations in the Autonomous Communities. The authorization is also compulsory for the use of loans if the region fails to comply with the deficit and debt targets, as well as the spending rule. 4. The CCAA must submit monthly information to the State in relation to the use given to the authorizations granted debt transactions. 5. The requirements to the autonomous communities to send information: outstanding debt at the beginning of the year, estimates of credit operations, debt issues and debt repayments during the year disaggregated by entities and the situation provided for each at the end of each year.