IMF increases Spain growth forecast

The International Monetary Fund yesterday increased its growth forecast for Spain in 2015 and 2016 to 3.1 percent and 2.5 percent from the 2.5 percent and 2 percent it forecast in April but warned the country against reversing unpopular reforms. “A reversal of past reforms would create uncertainty and could stall the recovery, especially if the external environment were to deteriorate,” the IMF said in a report at the end of an official visit to the country.
Some investors have fretted that Spain could cool the pace of its reforms after the country’s ruling People’s Party was punished at local elections last month. While the PP got more votes than other parties, its spending cuts and reforms, along with corruption scandals, have helped boost new parties such as the anti-austerity party Podemos.
The IMF said Spain needed to make additional reforms since it was currently benefitting from lower oil prices, the depreciation of the euro and the European Central Bank’s “supportive monetary policy”. “Vulnerabilities remain and deep structural problems persist, so additional efforts will be needed to sustain robust growth over the medium term.”  As political parties broker pacts in Spain’s regions after the elections and parties gear up for a general election by the end of the year, the IMF pressed the case for market-pleasing reform.