August 5, 2021

The IMF worsens its forecasts for Spain and calls for a "new boost" to reforms

The IMF worsens its forecasts for Spain and calls for a "new boost" to reforms



The International Monetary Fund (IMF), which last week announced a reduction of one tenth of its growth forecast for Spain in 2018, to 2.7%, has worsened its forecasts of debt, deficit and unemployment for the coming years, underlining the need to give new impetus to structural reforms.

According to the latest forecasts of the institution, the GDP of Spain will grow 1.8% in 2020, in line with its previous forecast, maintaining its projections for the following years in 1.7% in 2021 and 1.65% the next two years

As for other macroeconomic variables, the international institution has worsened its forecast for the evolution of public debt, which will reach 97.1% of GDP in 2018, when in April it expected 96.7%) to go down to 95.8%. % next year and 94.6% in 2020, compared to 93.9% previously estimated.

The IMF also expects Spain's public debt to represent 93.8% of GDP in 2021, above 92.8% of its previous forecast, while in 2022 it will be 93% and one year later in the 92.5%, compared to 90.9% of the forecasts for April.

For its part, the revision of the macroeconomic picture for Spain also contemplates a worse trajectory of the deficit, which will end this year at 2.7% of GDP, two tenths above that contemplated in April, and will stand at 2.3 % in 2019, when previously a 2% reduction was expected.

In this way, the projections of the institution point to a negative budget imbalance of 2.7% in 2023, half a percentage point above the deficit of 2.2% of the anticipated GDP previously.

This slowdown in the economy will be reflected in the behavior of the labor market, since the new forecasts of the IMF point to the weakening of the reduction in unemployment, which will close 2018 at 15.5%, in line with the forecasts of April, although at the end of the analyzed horizon the unemployment rate of Spain will be of 13.84%, against 13.61% of the previous forecasts.

"In Spain, the agenda of structural reforms that aims to increase the effectiveness of active policies and reduce the segmentation of the labor market, need a new boost," says the international institution.


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