The International Monetary Fund (IMF) warned yesterday that political fragmentation is a burden on the Spanish economy. Business confidence, investment and economic growth could worsen if the political class does not move towards an understanding, this UN body warned yesterday.
“The structural reforms that the country needs and the consolidation of fiscal policies could be hindered if this fragmentation continues”, Romain Duval, head of the mission responsible for overseeing Spanish politics, warned at a press conference yesterday.
Despite this warning, the IMF revised upwards the growth forecast for the Spanish economy and predicted a rise in GDP from 1.5% to 1.9%, in line with the forecasts of the Government of Spain, which place the increase at 2%; of the Bank of Spain, which has revised the increase to 1.9%, and above the forecasts of the European Commission, which place this growth at 1.7%.
“The country has shown great resilience in a context of weakening of the euro zone and tightening of financial conditions”, said Duval, who recalled that the Spanish economy grew by 2.5% last year. Along these same lines, the IMF forecast GDP growth of 2.1% for 2025.
According to the body, the growth of the Spanish economy responds to an increase in consumption after the gradual normalization of the savings rate and a relaxation of interest rates. The boost to the economy can also come from greater dynamism in private investment, which is now at low levels but which, according to the IMF, could benefit from the Next Generation funds, from the Government’s recovery plan and the relaxation of financial conditions.
Yesterday, the IMF also predicted a moderation in the rise in prices. “Inflation will continue to fall throughout 2024-2025 in a context of reduced energy prices and containment of wage pressures,” the organization said in a statement.
Regarding the Spanish public debt, the IMF considered that it remains too high and recommended fiscal efforts to reduce it. “With a level above 107% of GDP, the debt remains high and fiscal space is limited. A multi-year program is needed to reduce the primary deficit between 2024 and 2028, through an annual fiscal adjustment of around 0.6 percentage points on average”, said the IMF technician. This percentage translates into a reduction of 9,000 million euros per year and around 44,000 million over the five years as a whole.
Considering the country’s economic growth, the IMF recommended strengthening the efficiency of the tax system and expanding the tax base. Specifically, it recommended removing VAT exemptions, harmonizing VAT rates and increasing taxes on activities with an environmental impact, in line with the tax policies that other countries in the European Union already carry out.
The IMF also referred to the consolidation of specific levies on the extraordinary profits of banking and energy companies, and advocated reforming their current configuration. “If the authorities decide to make these taxes permanent, the bases should be adjusted based on a clearer definition of extraordinary gains to minimize their distorting effects,” he pointed out.
In the appearance, Duval placed special emphasis on the problems of access to housing, whether it is owned or rented. With the aim of solving this problem, the IMF instructed the Government to approve policies that stimulate housing supply, rather than supporting demand in a “distorting way”. In this sense, Duval criticized the Housing law and the decision of the Generalitat de Catalunya to apply the limits to the rental prices it collects, and asked the Generalitat to repeal them as soon as possible. “Previous experiences in other countries suggest that rental limits reduce housing supply and limit access to marginalized groups,” said the technician. As a solution, the head of the mission for Spain recommended to the authorities to increase the supply of housing and, for this reason, he showed his support for the recent measures to speed up the granting of planning licenses.
