The IMF down two tenths its forecast of Spanish GDP, up to 2.5%, for 2018



The International Monetary Fund (IMF) has reduced by two tenths its forecast of growth of the Spanish economy for this year, up to 2.5%, and warns that if new budgets are not approved the deficit could be diverted to 2 , 4% of GDP in 2019.

"The Spanish economy continues to recover the lost ground during the crisis," the IMF acknowledges in the annual report on Spain released today, although it notes that it has already exceeded the peak of the cycle and that the growth rate will moderate to 2.5% this year, 2.2% in 2019 and thus progressively up to 1.75% in the medium term.

The forecast for 2018 is a tenth lower than the Government had predicted and, according to the IMF, it responds to the weakening of the cyclical forces and a less favorable external environment.

In addition, it is two tenths less than what he had predicted a month and a half ago, when he disseminated his initial conclusions in his annual assembly, held in Bali.

The forecast of 2.7% that made then of the Spanish growth, after sending a mission to Spain at the beginning of October, already supposed a reduction of a tenth with respect to his previous projections, alleging also a worsening of the external environment and a weakening of domestic demand.

In addition, it has raised to 2.8% its forecast of the deficit on the GDP for this year and warns that if the government does not manage to carry out its budgets and the current ones are prolonged, the deficit could remain at 2.4%, four tenths more than budgeted.

That forecast of the deficit for 2019 already includes the measures announced by the government on income tax, the rise in the minimum wage and the increase in pensions, so the IMF sees it as "critical" to take additional measures to improve the balance even even if the new budgets are not approved.

It also warns that the public debt continues to be a "risk", so it is urgent to take action now that the economy is still growing at a good pace and before the cost of debt increases and the pressure for aging increases of the population.

"The resumption of the consolidation of the structural primary deficit should not be delayed any more by at least 0.5% per year of GDP (...) until a structural fiscal balance is reached and debt is clearly on a downward trajectory", recommends

The IMF also warns that international protectionism and a "brexit" without agreement could affect trade, which would harm exports and investments in Spain, while "political uncertainty in key countries of the euro zone" could increase yields of the Spanish debt.

Domestically, the "prolonged uncertainty" related to Catalonia could undermine confidence and weigh down investment, according to the IMF, which urgently needs to take advantage of "good" economic conditions to quickly reduce the high level of public debt and debt. great financing needs.

"Otherwise, there will be little room to proactively counter the adverse consequences of future crises in the economy," according to the international body, which advocates preserving and improving past reforms, especially to tackle youth unemployment and poverty.

Regarding the labor market, it cites as "major challenges" youth unemployment, temporary employment and involuntary part-time employment, which are the highest in the European Union (EU).

Although it appreciates that the private sector has reduced its indebtedness and the health of the banking system has strengthened, it notes that some segments of companies and households are still too leveraged and loans for durable consumer goods are expanding rapidly, while banks Spaniards "continue to lag behind" in terms of capital ratios.

The IMF understands that there are other factors that hinder the potential for economic growth, such as low productivity growth, unfavorable demographics and high structural unemployment, although he trusts that "the composition of growth will remain broad-based, reflecting the healthy change in the structure and competitiveness of the Spanish economy.

The international organization foresees that the surplus of the current account will be around 1% of GDP, which will gradually reduce the high negative international net investment position, and that core inflation will increase to 2% in the coming years.

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