IMF cuts 2016 GDP growth forecast for Spain to 2.6%

THE International Monetary Fund (IMF) has slashed its forecast for Spain’s growth over the next two years in its latest World Economic Outlook (WEO).

The forecasts suggest that the upturn in the Spanish economy since 2013, when the country exited the recession, may be running out of steam.

The growth forecast for 2016 has been reduced by 0.1 per cent, to 2.6 percent overall, and this is expected to drop to 2.3 per cent in 2017.  Both figures fall significantly short of the Spanish government’s estimates of 3 per cent growth this year and 3.2 per cent in 2017.

Despite the gloomy outlook, Spain currently remains in a healthier position than most other advanced economies with the exception of the US, with which it is on par. The GDP for the Eurozone as a whole is predicted to rise by 1.5 per cent during 2016 and 1.6 per cent in 2017, whereas for the UK the figures are 1.9 and 2.2 per cent, respectively.

Unemployment in Spain is set to fall to 19.7 per cent by the close of 2016, and to 18.3 per cent in 2017.

The IMF also predicts that global growth during 2016 will edge up to 3.2 per cent from 3.1 per cent in 2015, a more conservative estimate compared with the 3.6 per cent predicted in the last WEO in October 2015. The 2017 global forecast was cut to 3.5 per cent from 3.6 per cent in January 2016.

Maurice Obstfeld, the IMF’s chief economist said: “Global growth continues, but at an increasingly disappointing pace that leaves the world economy more exposed to negative risks. Growth has been too slow for too long.” 

He also added that a Brexit vote would have the potential to cause severe economic and political damage to Europe that is likely to spill over into the global economy.