IMF sees Spain in somewhat better light

The International Monetary Fund on Monday slightly raised its economic growth forecasts for Spanish for this year and the next but predicted Portugal would slide into recession for the next two years.

In its latest spring World Economic Outlook, the IMF said its now expects Spain's GDP to increase by 0.8 percent this year and 1.6 percent in 2010, up from previous forecasts of 0.6 and 1.5 percent. This are still well below the government's estimates of 1.3 percent for this year and 2.3 percent in 2012.

The report predicted the domestic real estate market would remain depressed this year, with house prices possibly continuing to fall, while an improvement in employment was very unlikely due to austerity measures, the costs of strengthening the financial sector, and growth below the economy's potential. However, its forecast for unemployment forecast are less pessimistic than the government's at 19.4 percent for this year and 18.2 percent.

The picture for Portugal is grim, however, with GDP expected to shrink 1.5 percent (compared with the Bank of Portugal's estimate of a contraction of 1.3 percent), and for a further fall of 0.5 percent in 2012. At the same time, unemployment is seen rising to 11.9 percent and to 12.4 percent in 2012. That is without taking into consideration the austerity measures Europe and the IMF are expected to impose on the country in exchange for its bailout.