ACCIONA, S.A. AND SUBSIDIARIES (Consolidated Group ...

Outlook
The world economy continues to be characterised by the delicate state of the euro zone.
In this context, in 2011 there was a significant increase in risk aversion in international
financial markets and a worsening of growth prospects. The world economy slowed
considerably in the second half of 2011, a situation which could continue in 2012. This
was the result of weaker growth in Europe and the slowdown of emerging economies.
The area causing the most concern at global economic level is Europe. EU authorities
have been unable to stem the sovereign debt crisis problem, which is having a
detrimental effect on the economic situation in the euro zone. In fact, the drop in
economic activity in the second half of 2011 and a downgrade of expectations led the
International Monetary Fund (IMF) to lower its growth forecasts for 2012. This is not
the case in the US, where the projected 1.8% growth is underpinned by an increase in
consumption. The emerging economies are expected to grow by 5.4%, with very high
growth rates in China (8.2%), India (7.0%) and Brazil (3.0%), with more muted
projections in the case of Eastern Europe as a result of its greater ties with the euro
zone. A slight recession is forecast for the euro zone in 2012 with negative growth of
0.5%, due to the continued existence of high sovereign debt risk premiums, the effects
of bank deleveraging on the real economy and the impact of the fiscal consolidation
process announced by certain Member States, including Spain.
The current economic situation requires committed action from the European authorities
that will gradually reduce financial tensions in Europe and worldwide risk aversion and
that will lay the foundations for the recovery of the world economy in the second half of
2012. However, a more important contribution towards recovery could be provided by
the expansionist economic policies adopted by the emerging economies.
Emerging Economies
The cooling of the emerging economies in 2011 led their growth differential with
respect to the more advanced economies to fall back to around 3% at the end of 2011,
below the historical trend of 4% that had been witnessed since the beginning of the
century. However, taking into account the situation of the world economy, this
represents only a slight slowdown, since confidence in the emerging economies has
proved to be very resilient. As a result, domestic demand has remained strong, even
though some of the effects of greater worldwide risk aversion have led to a drop in
capital inflows, adverse repercussions on international trade financing, a fall in asset
prices and lower exchange rates. This global risk aversion should lessen as the
economic situation in Europe becomes more stable.
Lower inflation will provide some leeway for economic policy to place more emphasis
on growth. These policies are likely to be more widely implemented in Asia than in
Latin America, since inflation is expected to fall more in that region.
Latin America is in a sound position from which to withstand the deterioration of the
world economy. Since the end of 2010 there has been a drop in economic growth in the
region. This has been due to higher inflation, which has reduced purchasing power,
together with the increase in global risk aversion, which led to a drop in capital inflows,
greater pressure on local currencies and heightened uncertainty.
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