The International Monetary Fund (IMF) has raised its growth forecasts for the Spanish economy this year from 0.6% to 0.9%. That brings the figures more in line with predictions made recently by the European Commission and the Spanish government, both of which believe that GDP will grow by 1% in 2014.
The new forecasts from the IMF, which were released on Tuesday, mark the third consecutive occasion that the Washington-based institution has released more optimistic figures about Spain. But it did not have such good news about unemployment: the IMF believes that 25% of the active population will be without a job in Spain in 2014, and that the figure won’t improve next year either.
The IMF also had bad news in relation to the new, large and complicated problem now worrying the euro zone: low inflation and its consequent risk of deflation. The periphery countries are those most in danger, and Spain specifically is the only one at “high risk” of falling prices. Ireland and Greece, meanwhile, are seen as at moderate risk.
The numbers beg the question as to whether exit from the crisis necessitates an intermediate, gray period of limbo
The fund is pushing the European Central Bank to tackle the problem, which is likely to hit those countries that have suffered most in the crisis and from cuts the hardest. Their internal devaluations lose their effect if neighboring and competing countries also adjust their prices. For this reason southern Europe is clamoring for action.
The latest IMF numbers beg the question as to whether the exit from this crisis necessitates the kind of intermediate, gray period of limbo in which the Spanish economy now seems stuck. In fact, the global perspectives report from the IMF suggests that the process of emerging from the current slump could take as many years as the crisis itself lasted.
The IMF has also improved its forecasts for 2015, suggesting that GDP growth will come in at 1% next year rather than its previous prediction of 0.8%. But that is still a much more pessimistic view than Brussels or the Bank of Spain, which put the figure at 1.7%.
That said, the IMF’s forecast for growth in Spain still exceeds that for Italy and Greece, both of which get a 0.6% rise, and The Netherlands, with 0.8%.
Spanish Prime Minister Mariano Rajoy was optimistic about the prospects for the economy when he addressed a meeting of business leaders on Monday. “Outside of Spain, and you know this better than I do, our country is looked upon as an example of how to overcome the crisis,” he said. But that attitude is markedly different from the view taken in Washington, where a supposed exit from the crisis with an unemployment rate of 25% is far removed from a model that should be emulated.