Spain’s “impressive” economic recovery has been recognised by a report from the International Monetary Fund which also pointed to strong challenges in the future.
It suggested Spain should increase its revenues with “growth and job-friendly” future measures, which could include fewer VAT exemptions or increasing excise and environmental taxes instead of spending cuts.
Adjustments could be made gradually, the IMF representative to Spain said. “We are not suggesting austerity,” according to Andrea Schaechter.
The IMF claimed that reforms under the previous Rajoy administration have “paid off”, particularly those in the labour market and the restructuring of the banking system. The government also cut back spending and introduced widely-resented austerity measures.
The main drivers of the economy had been “private consumption, exports and investment, aided by past reforms”.
Spain’s economic resurgence has been one of the most dramatic in the eurozone, powering ahead even during the 10-month period of political wrangling during which the country had only a caretaker government.
The annual assessment also looked ahead, expecting the recent healthy growth to begin to taper off in the medium term, particularly with continuing high unemployment.
Growth, it predicted, will be 3.2% this year and will continue into 2017 at the more moderate rate of 2.3%.
But "unemployment, especially long-term and youth joblessness, is still very high, while the use of temporary contracts for new jobs remains widespread."
From a staggeringly record high of nearly 27%, the jobless rate finally began to drop tipping down to 19% by October this year. It was the first time in six long years that the rate has been below 20%.
This is the second only to Greece as the highest in all the EU countries, with youth unemployment remaining still above a shocking 40%.
The IMF encouraged Spain to expand its reforms in order to “sustain strong growth and employment prospects over the medium term”.
It also called on Spain to reduce its public deficit which is expected to be 4.6% of GDP this year, short of the 3% EU limit.
