The International Monetary Fund said Spain is seeing the benefit of economic reforms and repeated a warning that backtracking would be a mistake.
In a report published Friday, the Washington-based fund noted the recovery has gathered speed due to a combination of structural reforms, a rebound in consumption and faster job creation. It maintained its forecast for expansion of 3.1 percent this year and 2.5 percent in 2016, outpacing the euro-area average.
“A key risk is a reversal of reforms already carried out, which would create uncertainty and could hamper the recovery,” the IMF said.
Despite the positive environment, the IMF sees persistent structural problems, including “very high” unemployment, low productivity and high levels of debt. It recommended further action on the labor-market and, noting that budgetary efforts have lost pace, said credible fiscal consolidation must be maintained.
“Acting while economic activity is strong and monetary policy is very supportive will make these measures easier to implement and add to their effectiveness,” the fund said.
Spain is due to hold a general election before the end of the year, pitting Prime Minister Mariano Rajoy’s People’s Party against the Socialists and the anti-austerity Podemos. Pegging its re-election hopes to the economy, the government has vowed to continue cutting taxes and unemployment while keeping public debt under control.
Recent polls showed the PP extending its lead as support for Podemos slipped, but remaining short of a majority.
by Maria Tadeo
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