In the space of six months, the International Monetary Fund (IMF) has changed its 2014 growth forecast for Spain significantly: from 0.6% to 1.2%.
Improved economic performance that caught the government and the main analysis services by surprise has led the Washington-based group to add three tenths of a point to its GDP growth forecast in April of 0.9%, which was three tenths above that in its January report.
The international organization is also more optimistic about 2015, when it hopes to see GDP grow 1.6%. After that, the recovery is predicted to slow. After two recessions in five years, the Spanish economy is expected to still need around five years to return to pre-crisis wealth levels.
Spain’s overarching policy priority must be to ensure the recovery is strong, long-lasting, and most pressingly, job-rich” IMF report
After 2015, the IMF adds one tenth of a point to annual Spanish growth, to reach 2.0% in 2019. That year, the Fund expects the unemployment rate to have dropped to around 18.7%, three points below April’s forecast.
“The economy has turned the corner, recovery is on the right track and the outlook is better than it was a year ago thanks to society’s efforts and adopted measures,” said James Daniel, head of the mission to Spain, during the report presentation.
The report insists that “Spain’s overarching policy priority must be to ensure the recovery is strong, long-lasting, and most pressingly, job-rich.”
The IMF also joined other organizations such as the OECD in warning about the increase in inequality in Spain and the risk of social exclusion for growing numbers of people, even those with a job. According to IMF figures, the four million people who have lost their jobs since 2007 have lost 50% of their income on average.
“Even the government is forecasting 19% unemployment in 2017,” laments the report, which asks for increased flexibility in the job market and wage moderation.
The organization also addressed one of the main shortcomings of the Spanish economy: its low productivity levels. “Reducing structural unemployment and substantially raising productivity should be top priorities. Appointing an independent agency on growth and jobs could help establish priorities and garner public support, as well as monitor progress,” reads the report.