IMF/Spain: Article IV consultation mission concluding statement
29 May 2014
The IMF found that Spain has turned the corner. The recovery started in the second half of 2013 and gained strength in the first quarter of this year, with the economy growing at the fastest pace since 2008.
Led by robust exports and a sharp improvement in financial market conditions, confidence has recovered and is feeding into rising private consumption and business investment. Critically, labour market trends are improving. We expect the recovery to continue over the medium term.
This recovery reflects the collective efforts of Spanish society. In particular, decisive policy actions are now beginning to bear fruit:
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Difficult decisions about spending, taxes, and pensions, have strengthened Spain’s budget and pension system, thus helping protect Spain’s welfare state for the future.
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By forcing weak banks to repair their balance sheets, the successfully-completed financial sector program is supporting the recovery by improving lending conditions.
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These budgetary and financial sector measures, together with crucial efforts at the European level, have helped reduce the government’s borrowing costs to record lows, catalysing the recovery.
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The labour reform and wage moderation are helping turn job destruction to job creation. Compared to a year before, unemployment fell in the first quarter of 2014 and jobs, as measured by social security affiliations, increased by about 200,000 in April.
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These collective efforts have substantially improved the prospects for creating jobs and raising living standards. Without these efforts, the recession might still be continuing and unemployment still rising.
But the Spanish people are still suffering from the legacy of the economic crisis. Most importantly, 5.9 million people are unemployed, more than half of them for more than a year. As a result, average household income remains below pre-crisis levels. Households, firms, and the government still face heavy debt burdens.
Thus all these efforts need to continue to ensure the recovery is strong and long-lasting. The recovery also has to be inclusive so that the unemployed benefit from more job opportunities. We suggest four priorities areas for action:
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Helping firms expand, hire, and invest
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Lowering regulatory barriers to boost jobs and growth
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Pursuing growth- and job-friendly fiscal consolidation
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More support from Europe
Full press release
© International Monetary Fund
