Buenas tardes a todos, good afternoon.
It is a very great pleasure to be here today and to have the chance to participate once more in this very prestigious event.
I am particularly happy to be able to do it in person.
The pandemic together with an unprecedented snow-storm in Madrid, have posed very serious challenges to organize it this week. So congratulations and thanks to the organizers for their effort and success of keeping this event in the different sites being used across Madrid on top of the video means which we are increasingly used these days.
The Spain Investors Day celebrates its eleventh edition and, as usual, it is considered to be a key milestone to kick off the year here in Spain in the financial world. And the best proof of the interest raised by this event is the number and relevance of the attending audience, and of course the excellent representation of speakers, including many representatives of the Government, and this is a very good testimony of the importance we give to this kind of events, especially in times such as these, when public-private partnership and cooperation is of the utmost importance to set in motion the important investment and reform plans to reactivate our economy.
When I last participated in this event , it seems like another life, another reality, the new Government had just been formed in Spain, and we were about to start working after many months in caretaking mode and at that stage nobody could have anticipated that that the world would be hit, disrupted by the pandemic, that we would have to focus all our energy in responding to the sanitary, economic and social crisis that started in March 2020.
Twelve months ago, it is true, my speech was already talking about uncertainty, being one of the key words that would mark 2020, I was talking about a “very complex, very challenging international environment”.
But it’s only fair to say the word ‘uncertainty’ has taken a new meaning since then, and many of the situations that marked the last twelve months have been very different than the one we anticipated, many top priorities we had have been fading away, others, new ones have arisen.
Notwithstanding the fact that of course it is impossible to anticipate unforeseeable developments, when we put forward our macroeconomic forecast for 2021, and that was last October when we presented the draft budget for 2021, we already highlighted four key downward risks to the economic recovery in Spain in the course of 2021.
First, risk, the evolution of the pandemic.
Our forecast contemplated sufficient vaccination in the second part of the current year. At the time, of course, we did not know that we would develop, we would not know that we would already have vaccination under way in December in Europe. This week we will finish vaccinating nursing homes, second shots will be administered as of Sunday, and we have not only one but two vaccines authorized and more on the way. This is obviously good news and brings light to economic prospects, although of course we still have difficult weeks ahead of us.
The second risk we identified back in October was geopolitical and commercial tensions.
And this is also improved, in recent weeks, with the EU-UK Brexit agreement, withthe election process in the United States, although to be fair, stress and uncertainty has been kept until the very last moment.
But developments since October has also evolved on the positive direction on this front.
Third, possible delays and difficulties to implement the National Recovery Plans.
Since October, there has been political agreement on the legal texts in Brussels, the national ratification processes are under way, we are working intensely in finalizing the Spanish recovery Plan, and in December the budget for 2021 was passed, it is an expansionary budget to support economic activity and job creation and it is also a very significant milestone from the financial stability, from the investors point of view, because we have for many years lacked a fiscal framework which would be operational from 1st of January until 31st of December of the year. Furthermore, we already adopted an executive order – a Royal Decree Law – to accelerate administrative processes and ensure a swift implementation of public investment under the National Recovery Plan.
Last, but not least, the fourth risk we identified was the risk of hysteresis, that economic hibernation would have more permanent and deep structural damage in our economic tissue.
And that is why from day one, the first package of measures was adopted on March 10th, from day one we acted in a decisive manner to provide liquidity to the whole economy, to set in place a short-term work scheme, known as ERTE, (I know Minister Escrivá already spoke about it yesterday), mechanisms that have provided an unprecedented protection for companies and workers as well as for household revenues, establishing especial support measures for self-employed workers (autónomos).
And this triple safety-net has been very effective to ensure that there is a solid basis for a strong recovery.
I will come back to this in a moment.
So in a nutshell, to sum up, all four downward risks have mitigated during the last months and we are now moving in the right direction.
That obviously does not mean, and I want to emphasise that, that the coming months will be easy; we still have to keep controlling the spread of the virus and we have to continue working to protect enterprises, jobs, and family incomes. As well, of course, as supporting the most vulnerable parts of our societies. We also need to start deploying the unprecedented 39 billion euros in public investment foreseen in the budget for 2021.
But the truth is we start to see the light at the end of the tunnel.
Taking into account all these considerations, and keeping in mind that forecasting now is more difficult than ever and that much has changed since we presented our economic forecasts in October, the Spanish Government expects a GDP inertial growth around 7% in 2021 and to continue the path of job creation that we initiated in the third quarter of 2020.
This is our inertial growth forecast without taking into account the potential impact of the investment plan and the European funds that should flow in the course of the year.
Indeed the performance of the Spanish economy during the third quarter of last year surprised all analysts with a 16.4% quarterly growth, according to the National Statistical Office, and job creation reaching around 570,000 jobs from June to September.
And this is remarkable since, allow me to remind all of us, the third quarter of 2020 was everything but normal: we already had some serious second wave outbreaks in important powerhouses, in Catalonia or Aragon, there was no international tourism, which has a material weight in our economy.
But despite that, enterprises and self-employed workers demonstrated strong resilience and were able to reactivate in a very fast and decisive manner once the stricter restrictions were lifted. Once more, like in previous economic crisis, Spain bounced back strongly.
And, conversely to other countries, available data indicate that this positive trend continued during the last quarter of 2020, especially in the labour market.
Social Security affiliation has maintained an upward trend in October, November and December.
Besides, workers protected under short-term work schemes stabilised around 750,000 despite the second wave of the pandemic.
And self-employed affiliation has recovered pre-pandemic records.
All of this means that the impact of the second wave in economic terms has been less profound than the one we suffered in the spring, in the first wave, and also that the recovery process has started and will accelerate in 2021.
It also means that the set of measures we have been relentlessly put in place since March are effective in protecting our economic tissue and employment and, therefore, to avoid structural damage.
Liquidity and direct support measures amount to 20% of GDP. Together with the impact of automatic stabilisers, they led the Treasury to issue an extra 110 billion euro in sovereign debt in 2020. Although larger amounts of support were announced in other countries, the truth is that actual support effectively provided in Spain is one of the highest among the large European economies and one of the most effective, according to the ECB analysis of impact of the support measures.
We acted fast and in an decisive manner, also in an efficient and effective manner, setting in place a basic architecture of instruments that have been adjusted according to the needs and have channelled funds directly to the real economy and families.
Two of these initiatives have proven to be especially useful.
First of all, the 140 billion euro public guarantee scheme articulated through the Institute for Official Credit (Instituto de Crédito Oficial, ICO) and through the financial sector. This instrument has already allowed the channelling ofmore than 115 billion euros in credit to 600.000 companies, mainly SMEs and self-employed workers, helping them to face their liquidity and investment needs during these difficult months.
It is worth pointing out that this time around the Spanish financial sector is in good health and able to contribute to the solution.
Last December we extended the maturity and grace periods for these credit lines, so that we make sure enterprises have enough time to recover before they have to face their financial obligations and in order avoid somewhat “artificial” solvency problems, which could have a macroeconomic impact. We also established a 10 billion fund to support the solvency of companies in strategic sectors and are of course working on additional instruments to avoid the failure of companies, which would be solvent without the pandemic, while not stopping the necessary restructuring process once the exceptional moratoria finish.
The second element was the exceptional public support granted to short-term schemes (the ERTEs) and the extraordinary allowance for self-employed workers (autónomos), which have covered around 5 million workers at the peak of the first wave, last spring.
Many doubted that such a tool, the ERTEs, would work in a country as Spain, with such a strong weight of services and SMEs.
But companies have seen in these months that this is a good temporary solution, avoiding the massive job destruction of previous economic downturns, preserving human capital and allowing them to reopen, to be reactivated, as soon as restrictions have lifted, as we saw during the third quarter of last year.
Around 80% of workers have already returned to their jobs and, despite the shift in the composition of these furlough schemes due to the second wave of the virus in the autumn, the number of workers covered has stabilized at around 750.000, very far from the peak in the spring.
According to our estimates, measures taken since March have prevented over 3 million layoffs and have protected, therefore, the incomes of thousands of households and companies in our country.
Looking forward, we need see whether this instrument should become a permanent feature of the Spanish labour market, in order to allow companies to have flexibility, internal instruments, avoiding the massive layoffs and volatility of jobs and job creation and unemployment in our country which is one of the characteristics of the Spanish market, which we saw in previous economic crisis.
Let me turn to the 2021 priorities.
First priority of all, obviously, is controlling the pandemic, since we all have seen and learned that economy and health go hand in hand, and we cannot have one without the other.
We will need to continue to fight the pandemic and support companies, support workers and families in the coming weeks and months, knowing that safety-nets we have designed work and, with the appropriate stability at the European level, we can go back to strong growth in the course of 2021.
The vaccination plan is a very important step forward but it will still take some time until we reach a sufficient share of the population immunized, so we need to hold the precautionary measures and our masks a little longer to ensure we control any outbreak in the best possible way.
The second priority is implementing the 2021 budget.
There is unanimity at international level in the view that both monetary and fiscal policies need to focus in supporting growth in 2021.
That is why we adopted an expansionary budget with an unprecedented investment level to mobilize private investment and accelerate the twin green and digital transitions.
That is also why the budget increases social expenditure to try to fight the clear risk that this crisis widens inequality and affects disproportionally, again, the most vulnerable in our societies, women and the young.
Inclusive and sustainable growth are not empty words that are incorporated in all our international statements and recommendations, they have to be guiding principles that need to be reflected in our policies.
In this same line, the third priority will be to finalising, getting adopted and deploying our National Recovery, Transformation and Resilience Plan.
The thrust of the Plan was presented by the President of the Government on October the 7th, with four strategic objectives: advancing the ecological transition, increasing, dynamiting the digital transformation, supporting the social and territorial cohesion, and pursuing the gender equality agenda.
With this in mind, we worked hard in the final months of last year on the detail of the 30 components of this Plan. That is, on the specific reforms and investment and reforms projects that will have a larger impact on the economic activity and act as levers for change.
Let me take a moment to stress this:
The Spanish recovery plan contemplates more than 60 billion euros in investment between 2021 and 2023, to be funded by transfers allocated from the EU Next Generation EU Recovery and Resilience Facility, to be complemented by recourse to the more than 70 billion loans up to 2026.
And these public investments will be deployed together with a coherent set of structural reforms, ranging from education and vocational training to energy, from labour market to pensions, from an improvement in business climate and better regulation to fiscal reform, from sustainable mobility to the modernization of public administration. Including a modernization of the insolvency rules.
Structural reforms directed to increase potential growth above 2%, should allow us to reduce structural unemployment, to increase productivity and move towards a more inclusive and sustainable growth pattern from the economic and financial but also from the environmental and social points of view.
We aim to present this Plan to the European Commission as soon as the legal process allows.
And we are confident that the Royal Decree Law adopted in December to articulate and accelerate the implementation of the Plan will speed up this deployment of investment and reforms starting already in January, on the basis of the 2021 budget, while funds will flow from the European Union in the course of the year.
Public-private partnerships will be key to implement the leading programmes:
I’m talking, for example about a more than 5.3 billion massive building renovation programme for energy efficiency; the 1.5 billion green hydrogen roadmap; the more than 12 billion sustainable mobility programme, including the completion of the strategic train transportation axis in Spain; and very significant investment in SME digitalization and digital skills plan; the digitalization and modernization of public administration plan; we will shortly present publicly these plans; 4 billion for 100% broadband coverage and 5G deployment; 1.9 billion for upgrading vocational training; 2 billions for active labour market policies.
We expect the recovery plan to mobilize a very significant volume of private investment too, more than 500 billion euros in private investments, and the key Ministries have already started to deploy the programmes as of 1st of January, thanks to the good preparatory work that we did in the second half of last year, immediately after the announcement in Brussels of the EU recovery Plan.
For instance, just to mention the Ministry that I am responsible for, we presented last July our digital agenda, Digital Spain 2025 (España Digital 2025), that contains the main plans, the main working lines for the future, the tenkey axes for the digitalization of our economy and our society, and Spain has a very good position to lead this process, with extremely strong infrastructures, leading companies in key sectors and a good starting point in e-government. 1/3 of total investment in the Recovery Plan will be directed to digitalization, and we have already presented three specific plans: 5G, connectivity and the National Strategy for Artificial Intelligence. The remaining three will be presented shortly: for SME digitalization, public administration and digital skills.
The yearly budget in this area has multiplied by six and we yesterday launched the first call for interest to ensure 100% broad band coverage in Spain and the acceleration of 5G deployment with a second call for interest for SME digitalization to follow in the coming days.
Likewise, other calls for interest have been launched to start identifying projects and preparing the formal process of implementation: for instance in the areas of green hydrogen, industry transformation, electric mobility and the fight against rural depopulation.
Cooperation among all levels of administrations and stakeholders is key. That is why we are also convening the different fora to listen to stakeholders, to explain, to share to allow for the appropriate participation of the different levels of government. I will be chairing tomorrow a third meeting of the specific table of social dialogue table to bring together labour unions and corporate representatives to articulate their participation in the deployment of the Recovery Plan.
Because this recovery plan is a huge challenge but also a unique opportunity to modernise our country, to put forward the reforms that everybody agrees are indispensable for the present and, more importantly, for the future of Spain.
This is not new. For the last more than two years we have deployed a well-known and coherent reform agenda, we have continued to work on the mid-term reforms in parallel with responding to the pandemic during 2020, and this reform process will accelerate obviously in 2021 in parallel to the acceleration of structural challenges in the world economy, related to climate change and digitalization.
Let me finally touch upon the financial outlook.
It is very clear that all measures adopted to fight the pandemic represent an important fiscal effort on the part of Spanish citizens. I referred already to the impact of the measures adopted, additional expenditure as a share of GDP as well as the additional debt issued during 2020 by the Spanish Treasury. It is worth mentioning that we took an extremely prudent approach and, thanks to the better than expected tax revenues, the final amount ended up being 20 billion euros less than we calculated when the pandemic started. Thanks to record low interest rates, financial cost dropped below 2% of GDP and we were able to continue extending average maturities of the portfolio above 7.7 years.
So despite this exceptionally challenging situation, thanks to investor confidence and of course, also to the action of the ECB, we have been able to improve long term fiscal and financial sustainability.
Net issuance in 2021 will amount to 100 billion euros, this is 10 billion less than we anticipated when the budget was presented, and around 30 billion in debt costs, again this is an extremely prudent approach, as we did last year.
We have started the year on the right track with a very successful 10-billion syndication of a 10-year bond yesterday, issued at an interest rate of 11 basis points.
I think the quality of the demand at that price was extremely high, with foreign investors taking almost 80% of the bond. And this shows that international capital markets trust, they have confidence in the Spanish economy.
One of the main novelties regarding the treasury for this year will be the issuance, for the first time in our country, of between 5 and 10 billion Treasury green bonds, building on the positive experience of the national promotional bank, the ICO, in 2019 and 2020.
As to the issuance strategy, we will keep of course the same priorities as we have in the past two years: we need to continue reducing our financing costs to reduce the average cost of the portfolio and extend the average maturity.
Two final points on my side, before I take your questions.
First, we still have some difficult weeks ahead.
The Pandemic is still a reality, and we must keep following all the sanitary measures to reduce infections and to control the spread of the virus, as we advance in the vaccination process.
We also need to be very alert to help our enterprises and workers to resist until all this crisis is over, as we have been doing since the first moment and we will continue to do in the coming weeks and months.
The Government is absolutely committed to this endeavour, to this objective, and all data confirm this has been to preserve the basis for a fast recovery in the course of 202.
And this is the second idea I want to convey to you, is that we are determined to make 2021 the year of the recovery and transformation of our country.
I see – and I am sure you have seen it too - the positive energy already mobilized by the national recovery plan: the number of investment projects that companies – large and small – are putting together, are bringing forward. They want to develop in the course of the year. The social consensus built around the key areas for investment and reform.
The need to undertake this investments and reforms now, to be able to face the challenges that we have inherited from the past, current challenges and challenges related to the future.
We must build on this basis. And I count on all of you, for investment is absolutely key to contribute to this aim, so that Spain leads the process to build a more sustainable and inclusive, greener, more digital, more equal and fairer world.
Let me close on this note.
Thank you very much.