13. 06. 2023 productivity, sustainable growth and prosperity 45th anniversary of cinco dias madrid pablo hernandez de cos governor * ienglish translation from the original in spanish ladies and gentlemen, i would like to begin by thanking amanda mars, the managing editor of cinco dias, for inviting me to take part in this event to mark the newspaper's 45th anniversary. since 1978, a year that also saw the approval of the spanish constitution, this newspaper has daily reported on and appraised the most important issues for our economy. it has thus been able to testify to the changes that have swept through the country, which have yielded very marked improvements in its citizens'well - being. over the past 45 years spain has witnessed cumulative growth in gross domestic product ( gdp ) and in consumption, both expressed per capita and in real terms, of 83 % and 60 %, respectively. this should not come as a surprise. the economic literature highlights the positive impact democratic institutions can have on economic growth, thanks, among other factors, to improvements in the business climate, private investment and the opening up of trade, as well as to greater fiscal capacity and spending on essential public goods, such as education and health. in the case of spain, these changes have been further enhanced by the european integration process. for instance, the economy ’ s degree of external openness, measured in terms of the weight of exports and imports in gdp, has increased by almost 50 percentage points ( pp ). the stock of private productive capital ( relative to employment ) has increased by 40 %, and much the same can be said of the stock of residential capital ( relative to the population ). the stock of public capital, essentially comprising transport, health, educational and other infrastructure, has almost tripled in real per capita terms over this period. government spending on education and health has risen twofold. the percentage of the adult population with intermediate and higher studies has increased by 28 pp and 20 pp, respectively. moreover, since 1978, the spanish population has grown by over 10 million, and the number of people in work has risen by more than 8 million, including over 6 million women. this has raised the female participation rate from a mere 28 % to 54 %. overall, economic success in the democratic era can probably be put down to a combination of our economic integration into europe, the consolidation of stability - oriented economic policies, the development of our welfare state and the modernisation of our tax system. against

for supervisors related to time horizon, data limitations, and inherent complexity. 7 one question that gets particular attention centers on time horizon and prioritization. more specifically, given the many risks that financial firms face — cybersecurity, geopolitical uncertainty, and the credit cycle to name a few — and the relatively long time horizon around climate change, why should supervisors focus on this particular risk? i think that is a fair question and there are good answers. first, we are already observing the impacts of climate change on financial firms. evidence continues to grow that climate change is affecting economic and financial outcomes. 8 moreover, evidence from climate science suggests that some further physical climate impacts are lockedin due to past emissions. 9 some investors consider an assessment of sustainability to be integral to their fiduciary responsibilities. 10 and, as i described earlier, supervised firms are choosing to build capacity in this areas, so supervisors need to understand and assess these changes. this is a risk management question for today with direct implications for safety and soundness. second, given the complexity of the problem, we all need time to build data, models, and intellectual capacity to address risks as they arise in the future. it took the better part of a decade to approach a steady - state in central bank stress testing capabilities for more familiar and arguably less complex risks like credit card losses or shocks to asset values from interest rate spikes. the economics of climate change are more complex with feedback effects, nonlinearities and massive uncertainty that will require substantial investments to understand. 11 third, financial markets and institutions face the potential for a “ minsky moment ” related to climate change — an abrupt repricing of assets in response to a catastrophic event or change in investor perceptions. 12 financial firms and supervisors need to consider the potential and impact of this type of sudden event. conclusion in closing, the impact of climate change on the structure and performance of the economy and the financial sector is happening now and will continue. conferences like this certainly help to further our awareness and understanding of this critical issue. i am confident that risk managers and central banks will continue to invest and build capacity to understand and mitigate these risks in order to make the financial sector more resilient. i look forward to hearing the insights from across the financial sector in the remainder of this conference. thank you for your attention. 3 / 4 bis central bankers'speeches 1 u. s. global change research program, “ fourth national climate assessment : volume ii : impacts