Spain's unprecedented double-dip recession will last for at least a further 18 months and poses a threat to the rest of Europe, the International Monetary Fund said.
Predicting a lost decade of growth for the eurozone's fourth biggest economy, the Washington-based Fund said the outlook was "very difficult" and that the fresh austerity measures announced by the government of prime minister Mariano Rajoy would have "a significant impact on growth".
The Fund estimates that policy tightening will reduce output by 1% by 2014 and that unemployment will also rise. Official figures released in Madrid earlier on Friday showed the jobless rate already at 24.6%, with 5.7 million people out of work.
"Spain is facing mounting market pressure and costly market access, with possibly negative repercussions for the rest of Europe, amid the longer term challenge of unwinding imbalances that built up during several years of excess private sector spending", the IMF said in its annual Article 4 health check.
"The economy is in the midst of an unprecedented double-dip recession with unemployment unacceptably high, public debt increasing rapidly, and segments of the financial sector lacking capital and market access."
The IMF said that Spain would not start to grow again until 2014 and that it would take until 2017 for national output to return to its 2007 level before the global financial crisis, with one in five people still out of work.
However, the report warned that Spain could have an even tougher time than Fund officials were predicting.
"Downside risks dominate.While the recently announced Euro area financial assistance for banks and the Euro area summit statement help to mitigate short-term risks, market tensions could intensify further, threatening market access, particularly if policies fail to stem capital outflows or due to further stress elsewhere in the euro area.
Private sector deleveraging could be faster than envisaged, and the fiscal consolidation may have larger than expected costs."
It added that Spain's prospects would be boosted by a "timely implementation of the summit decisions and continued progress toward a banking and fiscal union at the European level."
The report revealed that some members of the IMF's board favoured a less draconian approach to putting Spain's public finances in order.
"Directors welcomed the new fiscal package that supports a smoother path of consolidation in the context of weaker growth, although a few saw scope for a less front-loaded adjustment."
guardian.co.uk
Predicting a lost decade of growth for the eurozone's fourth biggest economy, the Washington-based Fund said the outlook was "very difficult" and that the fresh austerity measures announced by the government of prime minister Mariano Rajoy would have "a significant impact on growth".
The Fund estimates that policy tightening will reduce output by 1% by 2014 and that unemployment will also rise. Official figures released in Madrid earlier on Friday showed the jobless rate already at 24.6%, with 5.7 million people out of work.
"Spain is facing mounting market pressure and costly market access, with possibly negative repercussions for the rest of Europe, amid the longer term challenge of unwinding imbalances that built up during several years of excess private sector spending", the IMF said in its annual Article 4 health check.
"The economy is in the midst of an unprecedented double-dip recession with unemployment unacceptably high, public debt increasing rapidly, and segments of the financial sector lacking capital and market access."
The IMF said that Spain would not start to grow again until 2014 and that it would take until 2017 for national output to return to its 2007 level before the global financial crisis, with one in five people still out of work.
However, the report warned that Spain could have an even tougher time than Fund officials were predicting.
"Downside risks dominate.While the recently announced Euro area financial assistance for banks and the Euro area summit statement help to mitigate short-term risks, market tensions could intensify further, threatening market access, particularly if policies fail to stem capital outflows or due to further stress elsewhere in the euro area.
Private sector deleveraging could be faster than envisaged, and the fiscal consolidation may have larger than expected costs."
It added that Spain's prospects would be boosted by a "timely implementation of the summit decisions and continued progress toward a banking and fiscal union at the European level."
The report revealed that some members of the IMF's board favoured a less draconian approach to putting Spain's public finances in order.
"Directors welcomed the new fiscal package that supports a smoother path of consolidation in the context of weaker growth, although a few saw scope for a less front-loaded adjustment."
guardian.co.uk
No comments:
Post a Comment