IMF’s weak outlook for Spain reflects external factors, minister says

Economy Minister Luis de Guindos on Tuesday attributed the IMF’s latest dismal outlook for the Spanish economy to external factors such the slowdown in China and other emerging markets and the sluggish pace of recovery in the United States.

In the latest edition of its World Economic Outlook, the IMF predicted Spain’s GDP would contract 1.5 percent this year and 1.3 percent in 2013, the latter figure being in sharp contrast to the government’s current forecast of a fall in output of only 0.5 percent.

The organization also predicted that Spain would not be able to bring its deficit back within the European Union ceiling of three percent of GDP until 2017. It also forecast a shortfall for this year of seven percent and 5.7 percent for 2013. The government has agreed targets with the European Commission of 6.3 percent for this year and 4.5 percent for 2013.

De Guindos said the government was working on adjustments and reforms to ensure the IMF’s forecast do not prove valid. “What the government is working on is in trying to avoid that these forecasts become reality,” De Guindos said. He was speaking to reporters in Luxembourg where he was attending a meeting of European finance ministers (Ecofin).

The head of the Eurogroup, Luxembourg Prime Minister Jean-Claude Juncker, applauded Spain’s reform drive but insisted it meet its deficit-reduction commitments for this year and the next.

That seemed to jar somewhat with De Guindos’ comments. “There was a positive evaluation [by Ecofin of the government’s budget for 2013] and of its economic policy and the need to carry out a fiscal adjustment that takes into account the country’s economic situation,” the minister said.