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presentation
July 2018
Agenda
2. Fiscal rebalancing
2
A summary of Catalonia
Population (2017) 7.5 millions
Similar to Switzerland, Austria, Finland
and Denmark
16% of Spain’s total population
13 EU countries have less inhabitants than
Catalonia
GDP (2017) 234,651 M €
Similar to Finland, Denmark and Ireland
19,1% of Spanish’s GDP
Only 8 countries in the EU have a higher
GDP per capita (PPS)
GDP per capita Catalonia: 115.5
In PPS (EU-28=100) (2017)
-1 0,4
-2 0,3
-3 0,2
-4 0,1
-5 0,0
I II III IV I II III IV I
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2016 2017 2018
Source: Idescat, INE and Eurostat. Source: Idescat, INE and Eurostat.
The Catalan economy grew by 0.8% in the first quarter of 2018, the same rate that grew in
4Q2017. It is a growth rate only one tenth of percentage point lower than in the first three
quarters of 2017, in which the economy grew by 0.9%. In this way, the forecasts (based on
incomplete indicators and subjective perceptions) which predicted a sharp slowdown in the
last quarter of 2017 have not materialised. The average growth rate in 2017 has been 3.4%.
5
Broad-based economic growth and high dynamism in all
components of demand
Gross Domestic Product in Catalonia
(% of annual real change) More sustainable growth of
2017 2017 2018
Annual 1st 2nd 3rd 4th 1st
domestic demand and private
average quarter quarter quarter quarter quarter consumption than in the pre-
GDP 3.4 3.3 3.3 3.4 3.5 3.4 crisis period.
Domestic demand 3.1 2.7 3.2 3.6 2.7 3.1
Household consumer expenditure 2.4 1.8 2.7 3.0 2.0 3.2
Public administration consumer
Strong dynamism in industry
2.4 1.1 2.5 2.8 3.3 4.0 and construction, while the
expenditure1
Gross capital formation2 5.6 6.8 5.3 6.2 3.9 2.0 services sector is steadily
Equipment goods and others 5.4 7.3 4.5 6.4 3.4 0.2
rising.
Construction 5.1 5.9 5.9 4.9 3.9 4.2
3, 4 0.7 0.9 0.4 0.2 1.1 0.6
External balance
The strength of the industry
Foreign balance4 1.0 1.5 1.8 -0.2 0.9 0.2
Exports of goods and services 6.3 6.1 7.2 6.0 5.8 4.4
(5.2% y-o-y in 20181Q)
Imports of goods and services 4.4 2.6 3.1 7.7 4.1 4.7 generates positive spillovers
1 Includes the expenditure consumption by non-profit making institutions at the service of households. in the rest of the sectors.
2 Sum of gross fixed capital formation and the stock variation.
3 Includes the foreign balance and the balance with the rest of Spain.
4 Contribution to the GDP growth.
Source: Idescat.
Source: Idescat.
6
An open economy with a high degree of diversification
GVA distribution
(% of total GVA, 2017) Catalonia has a long industrial
Catalonia Spain1 EA-191 EU-281 tradition. The weight of the
Agriculture, livestock, forestry and fisheries 1.0 2.8 1.6 1.5 manufactures in the total GVA is
1.4 pp. higher than in the EU-28
Industry (mining, manufacturing and energy) 21.4 17.9 20.0 19.4
and 3.3 pp. that in Spain.
Manufacturing 18.1 14.2 17.1 16.2
Construction 4.8 5.6 5.1 5.3 Trade is also an outstanding
Services 72.7 73.8 73.4 73.7 feature of the economy.
Commerce; vehicle repair; transport and
25.2 23.6 18.9 19.0
storage, and hotel The administrative public sector
2
Trade and repair of vehicles 15.0 11.9 10.9 11.1
has a lower weight compared to
Transportation and storage2 4.6 4.9 5.0 5.0
the weight it has in the economy of
Accommodation services, food and
beverages 2
5.9 6.8 3.1 2.9 Spain and the EU.
Information and communication 3.9 4.2 4.7 5.0
Financial and insurance 3.6 3.9 4.7 5.0
Real estate activities 11.2 11.0 11.4 11.4
Professional, scientific, technical and
10.5 8.2 11.1 11.0 Services
administrative
Public administration, education, health and 72.7%
14.1 18.7 19.2 18.8
social services
Arts, entertainment, entertainment and other
4.1 4.0 3.5 3.5
services
1 2016data.
2 For
Catalonia, 2015 data.
Source: Idescat and Eurostat. Industry Agriculture
Construction 21.4% 1.0%
4.8%
7
Economic forecasts are positive
Macroeconomic forecasts of Catalonia
2017 2018 (p) 2019 (p) Domestic demand moderates:
GDP mp variation in volume (%) 3.4 2.9 2.5 the recovery continues at more
Domestic demand contribution to growth 2.7 2.3 1.9
sustainable levels after the
Household consumer expenditure variation in volume (%) 2.4 2.2 1.9
Public administration consumer rebound in past years (strong
variation in volume (%) 2.4 2.0 1.5 containment of demand in the
expenditure (1)
Gross capital formation (2) variation in volume (%) 5.6 4.4 3.2 crisis years).
External balance contribution to growth 0.7 0.6 0.6
Foreign trade balance contribution to growth 1.0 0.7 0.6
Consumption of public
Exports of goods and services variation in volume (%) 6.3 5.3 4.8 sector: continuation of the
Imports of goods and services variation in volume (%) 4.4 4.2 4.0 recovery but at a more
Balance with the rest of Spain contribution to growth -0.3 -0.1 0.0 moderate pace, taking into
(f) Forecast. account the deficit constraints.
(1) Includes consumption expenditure of non-profit institutions serving households.
(2) Includes stock variation. Gross capital formation is
Source: Ministry of the Vice-presidency and of the Economy and Finance. expected to grow at a slightly
lower pace, but still quite
We expect a slight moderation of growth in 2018, although positive according to demand
the economy will remain strong, growing well above most EA prospects and favourable
countries. Downward risks to the growth outlook mainly financial conditions.
stem from uncertainties in the external sector, particularly the
Trade flows are also expected to
risk of protectionism, the rise in oil prices and a less
keep growing, but a more
expansive monetary policy.
moderate rate. External balance
will maintain a significant
contribution to growth.
8
A highly diversified industrial sector
Industry GVA structure After being one of the sectors
(% of total industry GVA, 2015) most affected by the crisis, the
Manufacture of food products, Catalan industrial sector has
beverages and tobacco sharply recovered.
Chemical industries and oil refining
Its growth rate in 2017 (4.9%)
13.9 is clearly higher than that of
Manufacture of transport equipment
the whole of the euro area
27.4
(2.8%) and was higher than the
Electricity, gas, steam and air
conditioning supply main European economies.
11.7
Manufacture of pharmaceuticals In the 2018Q1 industry GVA
in Catalonia grew by 5.2%,
Manufacture of fabricated metal 1.3pp more than in euro area
5.1 8.5 products, except machinery
Productive diversification is
Manufacturing industry for equipment
and machinery important to be able to respond
5.2
8.1 Textile, manufacture, leather and to possible negative sectoral
6.0 footwear shocks.
6.7 7.2
Timber and paper industry Employment in the high and
medium-high technology
Rest of industry industry represents 7.0% of
total employment, higher than
in Italy (6.0%), France (4.5%),
and Spain (4.1%).
9
Increasing geographical diversification of exports
Trade balance in goods and services in Catalonia (% of GDP)
14
12
10 Balance with foreign
8 countries
6 Balance with Spain
4
2 External trade balance
0
-2
-4
-6
Source: Idescat.
Exports of goods by destination (% of total)
During 2017, the Catalan economy obtained a trade surplus of 70
goods and services of 28 billion euros, equivalent to 12.2% of 64,5
GDP: 60 59,8 62,6
55,4 53,7 60,3
foreign trade: 6.5% PIB 52,9 50,5 56,3
trade with Spain: 5.7% PIB 51,6
50 49,5
Exports of goods abroad are increasing their market share in 47,1
48,4
46,3 43,7
comparison to exports to the rest of Spain. 40 40,2
44,6 39,7
The EU-28 is the main destination of foreign Catalan exports: 37,4 35,5
Barcelona is the 3rd city in the world to host international congresses, both in number of events
and participants (ICCA, 2016). It is also among the leading cities in scientific or business
conventions and trade fairs linked to strategic activities such as ICT or the medical sector.
Barcelona is the 1st cruise port in the Mediterranean and the 4th in the world. In 2017, Barcelona
airport reached 47.3 millions of passengers (+7.7% more than the previous year). It is the 7th most
traveled airport in Europe and the 2nd one that has grown the most in 2017 in the top 10 European
airports.
11
Positive developments in labour market
Social Security Affiliations (% annual change)
Catalonia is creating net employment since end-
2013. Social security affiliation grew by 3.8% in
During 2008-2013 the number of
affiliations fell by an annual -3.2%
2017, the highest rate in more than 10 years
(3.5% in Spain).
In the first months of 2018, growth of affiliation
remains robust (rates around 2.5-4.2%).
Unemployment rate has decreased to 12.2%
(2018Q1).
The employment rate stood in 2017 at 66.9%,
higher than the EA level (66.4%). Higher
unemployment in Catalonia is due to a higher
Source: Ministry of Employment and Social Security. proportion of people willing to work.
12
Agenda
2. Fiscal rebalancing
13
Fiscal consolidation
Budget balance evolution
Deficit evolution and prospect (% of GDP)
0 0.00
-0.40 -0.10
-0.24 -0.56
-1 -0.60
-0.92
-2
-2.52 -2.84
-2.33 -2.15
-2.52 -2.27
-3
-2.66* -2.88*
-4 -4.21
-4.11
-4.48*
-5
-6
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
out. out. out. out. out. out. out. out. out. out. out. out.
Deficit targets
* Including one-off adjustments
Fiscal consolidation is a priority for the Catalan Government. The public accounts are being
rebalanced under the principles of efficiency and sustainability.
From 2010 Catalonia has reduced its deficit from 4.48% of GDP in 2010 to 0.56% of GDP in 2017
(7,857 M€ in 7 years).
14
Budget balance
The structural budget deficit has reduced 3.21 GDP points (from 3.25% in 2010 to 0.25% in
2017). The structural budget annual average reduction was 0.46 points.
The effort to reduce the deficit was 7,803 M€ (-86%) between 2010 and 2017.
1,0
0,23 0,29
0,32
0,0
-0,08
-0,38-0,29 -0,36-0,25
-1,0 -0,56 -0,67 -0,58
-0,86 -0,94 -0,83 -0,92
-1,28-1,20 -1,14
% GDP
-2,0
-1,86 -1,89
-2,24 -2,27 -2,15
-3,0 -2,66
-2,95 -3,10 -2,84
-3,46 -3,10
-4,0
-3,72 -4,11
-4,48
-5,0
2010 2011 2012 2013 2014 2015 2016 2017
Actual balance Cyclically-adjusted budget balance Structural budget balance Structural primary balance
16
Fiscal consolidation – Tax measures
Recurrent revenue measures. M€
Settlement
Tax measures
2012 2013 2014 2015 2016 2017
Income tax 57.8 57.9 55.3 52.7 58.0 73.3
Tax on wealth (recovery and increase of taxation) 305.0 562.7 431.3 461.7 495.5 511.4
Increase in tax rates on documented legal acts 40.5 45.6 49.0 63.5 68.7 103.9
Increase in the rates of the autonomous section of the hydrocarbon tax 60.8 139.0 109.1 106.0 107.1 107.5
Increase in property tax rates -- 35.0 174.7 199.4 226.7 274.0
Reform of inheritance tax -- -- 45.2 130.5 119.8 114.6
Reform of the civil protection levy -- -- -- -- 0.2 0.2
Taxation on gambling -- -- -- -- -- 12.6
Tax on large shopping areas -- -- -- -- -- 14.6
Tax on municipal waste -- -- -- -- -- 16.1
Modification of taxes 464.0 840.2 864.5 1,013.9 1,076.1 1,228.2
Judicial fees 5.1 2.1 0.0 2.3 2.7 3.5
Tax on stays in tourist establishments -- 35.2 41.0 43.2 47.6 52.5
Tax on the emission of gases and particles into the atmosphere -- -- -- 0.1 1.0 0.9
Tax on pollutant emissions of nitrogen oxides into the atmosphere from
commercial aviation -- -- -- -- 3.0 3.2
(1)
Tax on empty housing -- -- -- -- 11.5 0.0
Tax on beverages with excess sugar -- -- -- -- -- 22.7
Environmental risk tax on the production, handling and transport, custody
and emission of radioactive elements -- -- -- -- -- 7.4
Others fees 0.8
Creation of new taxes 5.1 37.3 41.0 45.6 65.8 91.0
Total tax measures 469.1 877.5 905.5 1,059.5 1,141.9 1,319.1
Pharmaceutical prescription or product tax 45.6 4.3 -- -- -- --
Tax on deposits of credit institutions -- -- 688.3 -- -- --
Tax on the provision of content by providers of electronic communication
services -- -- -- 7.3 18.4 --
Tax on the production of electrical energy of nuclear origin -- -- -- 30.3 -- --
Declared unconstitutional 45.6 4.3 688.3 37.6 18.4 0.0
Global tax measures 514.7 881.9 1,593.8 1,097.1 1,160.3 1,319.1
(1)
Pending res oluti on of the appea l fil ed by the State before the Cons ti tuti onal Court.
17
Evolution of public sector entities and job positions
Public sector entities included in the budget 2011 2012 2014 2015 2017
Generalitat 1 1 1 1 1
CatSalut, ICS, i ICASS 3 3 3 - -
Autonomous admin. entities and Catalan Healthcare Service 25 23 19 20 20
Autonomous commercial and financial entities 5 3 2 2 2
Public law companies 46 47 43 44 44
Trading companies 52 47 30 26 27
Consortiums 62 61 50 50 54
Foundations 46 43 35 37 34
Total public sector entities 240 228 183 180 182
Total other entities non-majority shareholding 28 26 26 24 19
Consortium non-majority shareholding2 - - - - 2
Total entities 268 254 209 204 203
Source: Generalitat de Catalunya. Ministry of the Vice-presidency and of the Economy and Finance. Presentation of Budget 2017.
Job positions included in the public sector consolidated budget 2011 2017 -65 entities
Executive and consulting personnel 549 566 (-24.3% compared
to 2011)
Civil servants 168,113 166,392
Private regulation personnel 62,351 60,620
Total public sector 231,013 227,578
Source: Generalitat de Catalunya. Ministry of the Vice-presidency and of the Economy and Finance. Presentation of Budget 2017.
Down budgeting
discipline
Spending Reviews
Budget transparency
Capacity building
Performance budgeting
Policy Evaluation
Allocative efficiency
Operational efficiency
and effectiveness
19
Budget reforms to improve expenditure management
20
Public sector administration
Revenue (PA-ESA Sector)
Million €
Outturn Outturn Var 2017/2016
Chapter
2016 2017 M€ %
1. Direct taxes 9,158 10,153 995 10.9
2. Indirect taxes 10,145 11,426 1,281 12.6
3. Fees, sales and other revenue 864 1,024 160 18.5
4. Current transfers ¹ 1,958 1,357 -601 -30.7
5. Property revenue 62 60 -2 -3.7
Current revenue 22,187 24,019 1,832 8.3
6. Real investment disposal 4 9 5 130.5
7. Capital transfers 190 114 -77 -40.3
Capital revenue 194 123 -72 -36.9
Non-financial revenue 22,381 24,142 1,761 7.9
8. Financial assets 269 198 -71 -26.4
Total revenue 1 to 8 22,650 24,340 1,689 7.5
9. Financial liabilities (total borrowing) 9,563 8,412 -1,151 -12.0
Total revenue 1 to 9 32,213 32,751 538 1.7
(1) It does not include Local governments share of Central Government's revenue neither European
Agricultural Guarantee Fund (EAGF)
21
Public sector administration
Expenditures Million €
22
Structural adjustment by level of administration
Autonomous communities concentrate 54.94% of the 2010-2017 adjustment, above their
public expenditure contribution (32.68%).
Central and Social Security System administrations participate 24.19% on the deficit
reduction.
Government of Catalonia’s effort represents 11.83% of the total deficit reduction. This
percentage is 5.96 percentage points higher than its share to the total public spending.
23
Spanish Fiscal Deficit can only be understood under a
consolidated view
Regional revenues based on a complex and unbalanced financing model
Financial analysts can not spend enough time to understand it.
And in any case it is not a sustainable framework and has to be renegotiated.
24
Agenda
2. Fiscal rebalancing
25
Current debt portfolio
GENERAL ADMINISTRATION GENERAL ADMINISTRATION
OUTSTANDING DEBT By type of funding PPP 2.2% Fixed/Floating
MARCH 2018
BONDS FLOATING
BANK 9.4%
General Admin. 70,052 M€ 7.9% LOANS
12.3%
ESA Entities 7,426 M€
TOTAL 77,478 M€
LIQUIDITY FIXED
Liquidity Mechanisms 54,382 M€ MECH.* 90.6%
77.6%
* Liquidity Mechanisms
Liq.Mech. / Total Debt 70.2% include FLA, Suppliers
Payment Fund and Social
Fund
Source: Banco de España
GENERAL ADMINISTRATION GENERAL ADMINISTRATION
FOREIGN Long/Short Term SHORT TERM
Euro/ Foreign currency CURRENCY 6.3%
0.4%
GENERALITAT’S
07/25/2018
RATING
Moody’s Ba3 (negative)
S&P B+ (negative)
Fitch BB (stable)
DBRS BB high (stable) LONG TERM
EUROS 93.7%
99.6%
27
Debt repayments
LONG TERM DEBT REPAYMENTS - GENERALITAT DE CATALUNYA
SITUATION AS OF 03/31/2018
Million € Million €
10.000 National Foreign Liquidity
MONTHLY Bonds TOTAL
REPAYMENTS Loans* Loans Mechanisms
9.000
April 2018 23 9 32
Average Life = 4.39 years
May 2018 163 2 23 188
8.000
June 2018 1,519 32 37 182 1,770
July 2018 15 11 989 1,015
7.000
August 2018 4 2 23 28
September 2018 15 13 182 210
6.000
October 2018 21 9 833 864
November 2018 9 145 23 177
5.000
December 2018 171 82 44 182 478
TOTAL 1,690 363 272 2,436 4,761
4.000
* National loan repayments include 33M€ of PPP.
3.000
2.000
1.000
2017 Maturities (ESA Entities) 520 Total 2017 needs 7,273 7,264
Long term loans 520
· Foreign Banks 141 2016 Deficit (excess) 484 484
· Spanish Banks1 371
· PPP 8
TOTAL FLA 2017 7,757 7,748
2017 GLOBAL GROSS NEEDS 7,264
Note 1: 2017 maturities do not include the roll-over of the short term
debt with Spanish banks .
30
Treasury needs are currently managed through the
liquidity mechanisms
31
2018 needs and strategy
2018 Funding Needs (estimate) Million € 2018 Funding Strategy (estimate) Million €
Non-financial needs 1,055
2018 Deficit goal
2018 Deficit goal (0.4% of GDP) 931 931
(0.4% of GDP)
Devolution 2008-09 neg. liq. of fin. system 125
2018 Maturities
2018 Maturities (Generalitat) 7,883
FLA 2018 9,443 (bonds; long term
Long term loans 6,193 8,388
loans; liquidity
· Liquidity Mechanisms 5,454 mechanisms; others)
· Foreign Banks 310
· Spanish Banks1 396
125 Others
· PPP 33
Bonds 1,690
32
Evolution of funding needs
Million €
Other 125
Liq. Mechanisms 5,454
33
DISCLAIMER
This presentation has been prepared by Generalitat de Catalunya.
The information contained in this presentation is elaborated based on the present
political situation and the existing legal and financial framework and must be read in
conjunction with all other publicly available information regarding Generalitat de
Catalunya. Each user of this presentation must make its own study and shall
independently evaluate and judge the relevance of the information contained herein.
This presentation is not intended to provide investment or financial advice, nor does it
constitute a recommendation to purchase, sell or hold notes issued by Generalitat de
Catalunya.
CONTACT:
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inversors.eco@gencat.cat
34
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