Speech by President of the Government at inauguration of Spain Investors Day forum

2018.1.9

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Hotel Ritz, Madrid

Mr Minister for Foreign Affairs, public officials, Mr President of Spain Investors Day, members of the board, ladies and gentlemen, dear friends,

A very good day to you all and thank you very much for attending.

For me it is a pleasure to inaugurate this new edition of Spain Investors Day, an event that, for the last eight years, has become a key focal point for the international projection of the Spanish economy. That is evidenced by the growing presence of Spanish and foreign companies that use this forum to do business, and furthermore, for these Spanish companies this event has undoubted value for showcasing their growing promise to the international markets.

And for the Government of Spain, and for me in particular, this event represents an opportunity to share with you how I see Spain and its economy at the start of this 2018, the main challenges we are facing and the goals we must aspire to in order to realise our potential for growth and investment in a changing world.

Ladies and gentlemen,

Our Constitution will celebrate its 40th anniversary in 2018, a piece of legislation that enshrined a democratic regime in Spain following a harsh civil war and a long dictatorship. I will not tire you with the political, historical and institutional interpretations that could be made regarding our Constitution. I just want to remark that what has happened in Spain since it was approved, both at a political and an economic level, can only be described as a resounding success.

In fact, very few countries have been capable of improving their standard of living at the rate Spain has over the last few decades: per capita income in Spain today stands in excess of 24,000 euros and our economy has grown more in the last half century than that of any of the other main economies in the Eurozone. I will begin by giving you some figures, some of which are perhaps not so well known, related to my country:

- Spain is the 14th largest global economy, with a GDP of 1.12 trillion euros; it is the fourth largest economy in the Eurozone and generates more than 10% of its GDP.

- Spain is now one of the most competitive economies in the world. According to the World Trade Organisation we are the 16th largest exporter of goods in the world. Spain's economy is nowadays focused on the international markets, which is a radical and promising change to our growth model.

- Such diverse sectors as capital goods, the agri-food industry, the automotive industry and chemical products figure among our main exports. Furthermore, the technology content of our exports is growing each year. Hence, by way of example, Spain is the second largest manufacturer of automobiles in Europe, behind only Germany, and the eighth in the world. In 2016, 2.8 million vehicles came off Spanish production lines, of which 85% were exported, and in the first 11 months of 2017, more than 2.67 million vehicles were manufactured.

- Spain is the third leading tourist destination in the world, and our tourism sector is the most competitive. In 2016, more than 75 million inbound tourists visited our country, with this figure rising to almost 78 million in the first 11 months of 2017. We received 6.1% of all the tourists in the world and 12.3% of those who visited Europe.

- According to the WTO, Spain is the 11th largest exporter of services in the world. Our exports of services amount to 114 billion euros, 2.63% of all global exports.

- Furthermore, Spain is one of the countries to boast the best infrastructure:

  • I am referring to traditional infrastructure, such as high-speed railways, highways, ports and airports, a sector in which we also head up airport management services at a global level; we are the second ranked European country to provide a service to the greatest number of passengers and we have the leading airport operator in the world.
  • But I am also referring to digital infrastructure, essential in today's world. Spain has the best digital networks in Europe. Thanks to the favourable framework for investment created by the government; over the last four years, from 2012 to 2016, 4G coverage has gone from zero to 94% of the population. In addition, 25.7 million users, including 11.3 million households, have fibre optic; heading up the European ranking. That is why Spain is among the leading seven countries in the world in terms of Internet and social media usage.

- In relation to the ease of doing business, Spain holds 28th position in the latest ranking prepared by the World Bank. This is an improvement of four places on the previous year and places us above such countries as France, Holland, Switzerland and Japan.

- Spain is now one of the most attractive destinations in which to do business. It is ranked in 15th place in the world in terms of receiving direct foreign investment and, furthermore, the commitment made by multinational countries established in our country to stay is very high.

- Spain is also an important investor country in the rest of the world. As we have just heard, we are the second largest investor in Latin America, and our accumulated investment overseas increased by almost 150% between the years 2007 and 2015.

So, ladies and gentlemen, these figures define the position of the Spanish economy at this time, after overcoming an unprecedented economic crisis with a great deal of effort. Spain went through five straight years of recession in which we lost 10% of our wealth, and from 2008, 3.8 million jobs. The unemployment rate exceeded 26% to hit the unprecedented figure of 6 million people out of work. This was the most terrible aspect of the worst crisis we have gone through in the last half century.

This was due to an unsustainable build-up of imbalances - public deficit, foreign trade deficit, inflation and loss of competitiveness - that Spain had been sucked into as a result of a model of growth based on external borrowing. It is simply enough to quote the example that in 2007, Spain's balance of payments posted a current account deficit of more than 100 billion euros, equivalent to 9.6% of our Gross Domestic Product.

At the end of 2011, my government took on the task of bringing Spain out of the crisis. The determination with which the reforms were carried out and the efforts made by the whole of Spanish society have led to the situation undergoing a complete turnaround. The worst of this crisis was left behind us some time back and after resolving the doubts of many people as to whether we would be capable of exiting that crisis, achieving this whilst remaining in the Euro and avoiding a bailout, Spain is now growing in a strong, balanced and sustainable fashion and it is doing so based on solid foundations; there is strong job creation, it has recovered its competitiveness and the outlook for the future is very promising.

2017 was our fourth straight year of growth, job creation and a foreign trade surplus. This is a combination of three elements never before produced by the growth model in Spain. In fact, the leading role played by our foreign trade sector is the differentiating factor in this cycle of growth and it is also the main guarantee that this expansive phase could turn out to be the longest-lasting in our history.

Spain closed 2017 with estimated growth of 3.1%, practically double the Eurozone average and a figure which is well above the forecasts made by all the analysts at the end of 2016, including the government and such international bodies as the International Monetary Fund, the European Commission and the OECD. This means we have enjoyed three straight years of growth above 3%, well above the figures for other large economies in the European Union, such as Germany, France and Italy.

This growth allowed us to recover the level of revenue enjoyed prior to the crisis in 2017. Moreover, this growth has strongly translated into job creation; after having created half a million jobs in each of the three previous years, 2017 saw a balance of 611,000 new jobs created. In total, at today's date, we have recovered two thirds of the jobs shed, but we need to see more; another half a million jobs a year for at least each of the next two years in order to achieve the goal of seeing 20 million Spaniards in work by the end of 2019.

As well as creating jobs, Spain has spent the last four years heading up the reduction in unemployment in Europe. Over the last 12 months, the number of unemployed has fallen by almost 600,000 people and now stands below the 4-million mark. This is still a very high figure, but the lowest since 2009.

Growth and job creation go hand-in-hand with the recovery of competitiveness and the Spanish economy is now much more competitive than it was before the crisis. It is growing because it is able to sell its products to the rest of the world and no longer depends on external borrowing. We export one third of our GDP, a figure only Germany can match in Europe, and Spanish companies are increasingly exporting more, and their products are increasingly reaching more, and more diverse and sophisticated, markets. The recovery of competitiveness has led us to close 2017 with four straight years of a surplus in the current account.

Many other indicators in 2017 point to the good state of the health of the Spanish economy:

- The confidence of economic agents remains at the same high level as in recent years.

- Investment in capital goods is performing in a highly dynamic fashion; since mid-2013 this has increased by almost 30%, compared with 24% in the European Union of 15.

- The recovery even filtered down to the construction sector in 2017, which is growing but without the excesses of the past. The current outlook is for a gradual return to normality in the property market, which will allow some of the 1.5 million jobs shed in this sector during the crisis to be recovered.

In short, the recovery of the Spanish economy is now more consolidated, and the outlook for growth is good in the medium term.

Ladies and gentlemen,

Spain is in a position to continue heading up growth in Europe, well above the Eurozone average, and also ahead of the United States, Canada and Japan. In fact, the International Monetary Fund estimates that Spain will be among the most developed countries in the world to grow the fastest in 2017 and 2018. Furthermore, Spain will head up job creation among the European Member States of the OECD.

In the medium term, my government forecasts that the Spanish economy will grow by an average of 2.5% until 2020 and the unemployment rate will fall to 11%. Spain could be close to budgetary balance by 2020 with public debt standing at around 91% of GDP and the surplus in the current account remaining at around 2% of GDP.

To realise these goals, we need to remain committed to the formula that has given us such good results in recent years: budget stability and reforms. And this, despite a more complicated political backdrop in this legislature than in the last one.

Firstly, my government is working to approve the General State Budget for 2018. This requires forging agreements with other political forces in an exercise of democratic responsibility such as we did in 2017, and which was very highly rated both in Spain and abroad. Budget stability has been at the heart of the recovery in confidence and hence of the growth that Spain has enjoyed since 2014. Our country has also made the greatest structural effort at reform out of the main economies.

Secondly, we must press on with adopting measures to guarantee that our country continues to be an economy open to foreign trade, competitive, productive and with an ability to adapt to a changing environment, above all, within the framework of the digital revolution under way. My government is well aware of that and in 2018 we will step up our efforts in a multitude of areas, such as worker training, active employment policies, R&D+i, digitalisation, the elimination of administrative burdens and backing for entrepreneurial activity.

Of course, the well-being of Spain also depends greatly on the stability of the European project. For that reason, my government is a staunch supporter of continuing to take steps to enhance the Monetary Union and to ensure that Europe is strong and open.

Ladies and gentlemen,

Allow me to also make some political considerations in the sense that politics can help achieve these goals or, on the contrary, hinder them.

All of our achievements and forecasts are based on compliance with principles that are conditions precedent for the smooth development of co-existence, politics and economics: I am referring to such principles as legal certainty, security and respect for the rule of law.

In Spain, as you are aware, we have borne witness recently to the questioning of the very basis of our democracy by secessionism, another form of populism among many forms that are springing up in Europe. We shouldn't forget that the aim of all of these forms of populism is to bring political projects into question, whether these be Spain or the European Union, which have allowed us to guarantee peace, prosperity, democracy and citizens' rights, solely in order for the rights of the few to prevail. We must, hence, combat them through the law and through reason.

The political uncertainty in Catalonia undoubtedly represents a challenge to Spain and to its institutions, and also to the economy. In fact, political instability in that autonomous region is the greatest, or may well be the only, shadow hanging over the Spanish economy. And this led the government to lower the growth forecast for 2018 downwards to 2.3% of the Gross Domestic Product.

However, it is no less certain that we have found a legal, democratic and politically unimpeachable response to the unprecedented attack on our constitutional order of an illegal declaration of independence by a region of Spain.

Following the elections on 21 December, we hope that a regional government can soon be formed that upholds the constitutional order and the rule of law, and that the situation returns to normality. If, as we hope, this takes place, growth could be much higher than the current forecasts and probably similar to the figures for the last few years, and the main beneficiaries of this would be Catalonia and its people.

Fortunately, we have also seen how the social and economic stakeholders, noteworthy among which are the citizens themselves, but also companies, have reacted intelligently, with prudence and common sense. The people of Spain know that without legal certainty and respect for the law, there is no prospect of economic prosperity.

Ladies and gentlemen, I will end now.

Those of you who attended this forum for the first time eight years ago will have been able to see the extraordinary path that the Spanish economy has taken over this time. Those who had the courage to invest in Spain at those tough times during the crisis will undoubtedly have obtained a profit from your vision of the future. Spain did not fail you. We have gone from being a country afflicted by imbalances to having a strong, diversified, balanced and competitive economy. And we have achieved this thanks to our efforts to recover competitiveness at all levels.

It is precisely the recovery of competitiveness and the leading role of our foreign trade sector that has not only provided guarantees of the sustainability of our economic growth, but will also allow further progress to be made in raising our levels of revenue, productivity, salaries and, in short, in improving our well-being. That depends on us and on us continuing to be able to adapt to a world undergoing drastic and continuous change. My government is aware of that and it is committed to a reformist agenda and to Spanish society. International investors have always accompanied us in this success story that is Spain and I trust and encourage you to keep doing so.

Thank you very much.

Non official translation