Spain’s economic recovery wins praise from IMF

The Spanish economy is one of Europe’s top performers this year.

The International Monetary Fund (IMF) – a global organisation designed to oversee financial stability worldwide – has heaped praise on Spain’s economic recovery, hailing the country’s “impressive” turnaround just a few years after one of the worst recessions in recent history…

In its annual country assessment published last week, the IMF said of Spain: “The Spanish economy has continued its impressive recovery and strong job creation. Earlier reforms and confidence-enhancing measures have paid off, and combined with external tailwinds and fiscal loosening fuelled the strong economic rebound of the past two years.”

The IMF’s words of praise also extended to private consumption, exports and investments, with the government’s past reforms highlighted as a decisive factor in steering the turnaround and bringing confidence back into the economy at all levels.

Prime Minister Mariano Rajoy was at the helm during the lean years, and is now back as PM for a second term – one that the IMF is confident will be characterised by more positive economics. The IMF was particularly keen to praise Rajoy’s 2012 labour market reforms, which it said helped to strengthen growth and support job creation.

However, the praise was not universal, with the report stressing that the new political climate for reforms is less attractive. Rajoy may have returned to power, but his absolute majority has been weakened and, as a result, any further wholesale changes that his party, the PP, wish to make to Spanish society or markets will likely face stiff opposition from the PSOE and other parties with sizeable numbers in Parliament.

The IMF also said that, while Spain’s medium-term growth prospects are good, the high structural unemployment (currently at around 19%) would have to be tackled in the long term. The IMF suggests measures to raise the size of domestic companies and the removal of barriers for trade between regions within Spain.

Still, despite these suggestions, there could be little doubt that Spain’s economic recovery has been encouraging and surprising in equal measure, with the IMF report concluding: “Employment has been growing at more than 3% annually, with almost 1.1 million jobs created over the past two years, supported by wage moderation and labour market reforms.”