Spain warned over ‘weak and fragile recovery’ by IMF

The IMF's growth forecast for Europe's fifth-largest economy for next year was lower than the 1.3pc expansion predicted by the Spanish government, which is under pressure to close its public deficit.

Spain warned over 'weak and fragile recovery' by IMF

The IMF yesterday lowered its 2011 growth forecast for the Spanish economy to 0.6 per cent from the 0.9pc it foresaw in April and warned the recovery "is likely to be weak and fragile." "The particular challenges facing Spain will likely make the recovery slower and more fragile than in the euro area," it said in its latest report on the country's economy.

The IMF listed a deflating property bubble, a "dysfunctional" labour market, heavy private sector indebtedness, weak competitiveness, "anaemic" productivity growth and a "banking sector with pockets of weakness" as the challenges faced by the Spanish economy.

"Not only does each factor pose a challenge by itself, but, together, they may create a vicious cycle of negative feedback," the IMF said in the report.

"The central scenario is one of a long and gradual adjustment of the various imbalances in the economy."

Spain scraped out of recession during the first quarter when it expanded by 0.1pc from the previous quarter and the government expects it will expand by 0.3pc this year.

The IMF predicts the Spanish economy will contract by 0.4pc this year. It forecasts growth of 1.7pc in 2012 and of 1.9pc in both 2013 and 2014 and of 1.8pc in 2015.

Spain was the last major world economy to emerge from recession and concern over its weak growth prospects has fuelled market worries that it may struggle to rein in a public deficit that shot up to 11.2pc of gross domestic product last year, the third highest level in the eurozone after Greece and Ireland.

The country entered its worst recession in decades during the second half of 2008 as the global financial meltdown compounded a crisis in the Spanish property market





Let The Barcelona Reporter Know What You Think Post your comment Below






News Source © 2010 gulf-daily
Text within the news headline and/or news body may be subject to copyright Barcelona Reporter does not claim copyright to any such text.unless it is written by one of our reporters :
Please refer to the URL-referenced web page (the ‘Article Source’) for further information and details of the original source from the Barcelona Reporter.com web site. Copyright remains with the original copyright holder