SPEECH

Crisis COVID-19
Supply shock

A supply shock is an unforeseen event that suddenly changes the supply of a commodity or
commodity, resulting in an unexpected change in price.

Supply shocks can:

 Negative: resulting in a decrease in supply, reduces production and itsprice increase,

 Positive: resulting in an increase in supply and falling prices due to a shift to the right
of the supply curve.

Demand shock

Demand shock is a sudden, unexpected event that dramatically increases or decreases demand
for a product or service, usually temporarily.

Demand shocks, like supply shocks, can be:

Positive: a sudden increase in demand, which will cause a shortage and increase the price. This
translates into a shift of the demand curve to the right.

Negative: it is a decrease in demand, which will cause an excess supply and a lower price.

Examples of positive and negative demand shocks

A positive demand shock can come from fiscal policy, such as economic stimulus or tax cuts.

Negative demand shocks may come from contractionary policies, such as tightening the
money supply or reducing government spending.

Supply and demand shock in Covid-19

COVID-19 has caused both supply and demand shocks. For example, due to social distancing
and lockdowns, workers could not be present on production lines, so there was a shortage of
products. And consumers weren't going to restaurants and lounges, so there was a demand
shock in those and other industries.

THREATS
SUPPLY CRISIS

1.Disruption of supply and distribution chains

Due to the confinement, the closure of borders and the cessation of economic
activities, together with the great dependence of many of the countries on producers
and manufacturers of materials and inputs to produce, the slowdown in economic
activity and transport restrictions in the countries affected by the coronavirus are
expected to have an impact on the production and profitability of the selected global
companies.

In this scenario, small and medium-sized businesses will have greater difficulty
surviving the disruption caused by the coronavirus.
 Particularly dramatic may be the situation of companies linked to the tourism sector,
which have seen their ability to maneuver limited as a result of the restrictions
imposed by governments around the world to curb the spread of the coronavirus.

2. That the supply shortage crisis is prolonged

It occurs due to the interruption of distribution chains and confinement, since no

products have been produced and raw materials extracted, so the interruption of the
distribution chain is added to the shortage of supplies, which causes the paralysis of
the Spanish business fabric and the closure of many companies.

As a result of this supply crisis we have a reduction in the rate of growth of Spanish
GDP

DEMAND CRISIS:

3. THAT THE ECB STOP BUYING GOVERNMENT BONDS

That the ECB stopped buying public debt would put at risk the undertaking of
structural reforms, since until now, almost all of Spain's deficit this year has been
financed directly by the European Central Bank.

If the ECB does not buy public debt, Spain no longer sells its debt to the ECB, and will
have to finance it through the markets, which may distrust the government's
management if it does not undertake the structural reforms requested by the
European Commission, such as the labor market or pensions.

OPPORTUNITIES
1.SAVINGS DURING CONFINEMENT

Due to the lockdown, those whose businesses were not affected were able to save

2. The EU has already approved several initiatives to manage short-term needs

 a programme for the purchase of public and corporate debt with particularly flexible
conditions by the ECB.
 a precautionary credit line from the European Stability Mechanism (ESM) to cover
health costs without conditionality.
 a line of credit through the SURE program to finance part of the wages of workers
affected by the lockdowns, and
 the European Investment Bank has provided guarantees and international financing to
European companies.

3. The Commission has also made available

 Emergency funds to spend already this year

 It has presented an ambitious proposal on two fronts totaling almost two billion euros:

o Thereinforced multiannual financial framework 2021-2027 (with a budget of

1.1 trillion) and, in
o The Next Generation recovery plan 2021-2024.

4. The BE's monetary policy shall:

cuts in benchmark interest rates to minimum levels and, in many cases, deployment/increase
of unconventional instruments, such as asset purchases. (The ECB's reaction has been notably
stronger than after the 2008 financial crisis.)

This has focused on asset purchase programmes and the provision of long-term financing, as
well, with measures to make the guarantee framework more flexible to counteract the risks
that a possible financial fragmentation of the euro area would have for the proper functioning
of the monetary policy transmission mechanism and for the region's economic outlook.

Inflationary process
What is an inflationary crisis?

An inflationary crisis is an economic process caused by an imbalance between production and

demand, which causes a continuous increase in the prices of most goods and services, and a
loss of the value of money to buy or use them, thus producing an impoverishment of families
and therefore of the economy of the country.

THREATS
It puts at risk that the recovery of SMEs and companies in general

The threat of a recession, according to economists the real, due to the war conflict between
Ukraine and Russia, has produced an increase in the prices of energy and gas, which in turn, as
these are used for production, have produced a rise in the cost of production and therefore, A
rise in prices.

In the same way, wages have not increased and GDP has fallen, so the salary has not evolved
according to the CPI and there has been a mismatch between wages and prices, which will
produce an impoverishment of families, which will make them unable to spend in the economy

In turn, this inflationary process can cause the flight of potential investors in the Spanish
economy

Core inflation, which is very high and this reflects a problem in the economy.

Energy transition The energy transition requires adjustments for a long time, intensifying the
scarcity of certain inputs, and putting pressure on energy prices

That the price increase is not temporary short and lengthens

OPPORTUNITIES
Those inherent to the internationalization of companies. They must seek new markets with
greater potential than our current trading partners offer. In addition, it is necessary to
maintain the attractiveness of Spain as a destination for foreign investment.

In addition to carrying out a strong anti-inflationary policy, we must sustain our growth in our
entrepreneurs: small entrepreneurs and the self-employed.

The economic recovery of Europe and the expansion of the market by the entry of countries
into the EU will be beneficial, as well as the increase in population through the labor
regularization of immigrants.

We must not neglect the great engine of the economy: tourism. It is here and in the
improvement of productivity where the future is at stake.
Using European funds well