On January 27, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Spain.
The economy has continued its recovery and imbalances are falling. Real GDP expanded by 3.2 percent in 2015 with the same growth rate expected for 2016, despite a prolonged period of domestic political uncertainty. Almost 1.1 million jobs were created over the past two years. The rebound in private consumption, exports, and investment, aided by past reforms, has remained the main driver of growth. The European Central Bank’s accommodative monetary policy, low oil prices, as well as fiscal relaxation have also provided support. The current account is projected to record its fourth consecutive annual surplus. Private sector balance sheets have further strengthened, while public debt remains high at about 100 percent of GDP remains high. Real GDP growth is projected to moderate to 2.3 percent in 2017.
Earlier reforms and confidence-enhancing measures have laid the ground for this rebound. In particular, wage moderation and greater labor market flexibility have helped the economy regain competitiveness and have contributed to strong job creation. Together with banking sector reforms they have made the Spanish economy more resilient.
Nevertheless, unemployment remains very high at around 19 percent, with about half of the unemployed having been jobless for more than a year. Labor market duality is still widespread, and productivity growth is relatively weak. At the same time, high public debt, pockets of over-indebtedness in the private sector, and the still large negative net international investment position leave the economy vulnerable to shocks.
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.