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FINANCIAL STATEMENTS, MANAGEMENT AND CORPORATE GOVERNANCE REPORT.
2011
THE SPANISH ECONOMY IN 2011
(THOUSANDS OF EUROS)
Data on the Spanish economy available at the date of authorisation for issue of these financial statements are discouraging,
not just the performance in 2011, but also the outlook for 2012.
Last year featured a series of shocks in the debt markets, above all issues by European peripheral countries struggling
with fiscal imbalances (notably Por tugal, Italy and Spain), whose spreads versus German bunds reached unsustainable
levels in the latter months of the year. In Greece, the situation became dramatic due to the scale of the country’s
imbalances and its high debt.There were even fears that the country would have to leave the single currency because
of both its clear inability to repay its debt and the harsh measures required by its par tners amid an economic recession.
At the date of authorisation for issue of these financial statements, the measures adopted by the new governments in
both Italy and Spain had eased pressures on debt spreads considerably. As a result, access to these markets was mostly
back to normal.
2011 proved to be a year of a multi-speed global economy, with the peripheral countries (mainly emerging Asia and Latin
America) still achieving healthy growth rates, albeit less so than in previous years.The US showed signs of rebounding,
with GDP growth of 2.8% for the year, but it was hardly the global growth driver it was expected to be.The European
Union was a major disappointment –data for the full year have yet to be released, but the paltry 0.2% growth in the
four th quar ter bore testament to the steep slowdown seen throughout the year- prompting expectations of a sustained
economic recovery to ultimately shift to the reality of a dip back into recession.
For Spain, data for 2011 indicate that annual GDP growth (estimated at 0.7% at the date of authorisation for issue of
these financial statements, as final data had yet to be released) was clearly insufficient to herald any sor t of recovery.
Worse still, the trend during the year was downward.The Spanish economy fell back into recession in the four th quar ter,
with GDP contracting 0.3% year-on-year. Meanwhile, most analysts forecast a steeper downturn in 2012, with falls of
over 1.3%. Private consumption looks set to remain weak, while public demand should plunge in the wake of the fiscal
and budget adjustment measures affecting the various levels of administration.
The unemployment rate is another story, reaching 22.9% of the total labour force in 2011 the highest in Europe- and
on track to top 24% according to most analysts.
Prices also did not perform well during the year either, rising 2.4%. Inflation was mainly caused by upward pressure
on fuel and commodity prices due to both geopolitical factors and waning demand by the large emerging economies.
However, data for January this year show the headline rate ticking back to 2%.
Lastly, we would highlight the fiscal adjustment measures adopted by the new government in Spain after the general
elections.Although necessary, these measures are likely to: 1) undermine disposable income levels from February, at least
initially; and 2) dent economic recovery, given the traditionally high weight of private consumption in domestic demand
in Spain. In shor t, 2012 will probably bring about the aforementioned recession, from which Spain will probably not
emerge until well into 2013, according to most analysts.