The International Monetary Fund (IMF) has released a concluding statement on Spain’s economic prospects following the 2025 Article IV Mission. The analysis emanates from an official staff visit as part of routine consultations under Article IV, which the IMF conducts annually with member countries.
The IMF's staff report showcases Spain's robust economic performance, pointing to a 3.2 percent rise in economic activity in 2024, fueled notably by growth in services exports and enhancements in the labor market. However, it highlights that investment recovery remains sluggish, influenced by factors including policy uncertainty post-pandemic.
In the near term, growth is anticipated to stay strong but may taper gradually as improvements in export and working-age population gains moderate. The IMF anticipates that demographic aging will align growth closely with medium-term potential, approximately 1.7 percent. "The annualized growth rate of over 3 percent observed since mid-2023 is expected to decline gradually," the report forecasts.
Despite positive trends, the IMF identifies multiple risks. An escalation of trade tensions, especially involving the EU, is seen as a significant external threat. Furthermore, domestic political fragmentation could impede fiscal policy if deficit reduction targets are not met.
Fiscal policies noted improvement in 2024, largely due to increased revenues from labor market expansion, countering high public spending. Nonetheless, Spain’s debt remains high at 101.8 percent of GDP, vulnerable to economic shocks. The IMF advises capitalizing on current growth to reduce debt risks efficiently.
The IMF suggests reforms to address fiscal pressures, including potential revenue measures versus the 2021-2023 pension reforms. It advocates the government consider structural changes to manage future pension expenditures within a sustainable financial framework.
Spain’s financial system displays resilience, underpinned by well-positioned banks with adequate capital levels and maintained low levels of household debt. However, rising individual insolvency filings post-insolvency reform prompt a call for adequate court resources.
Rapid housing price growth does not currently destabilize financial markets, yet the IMF encourages policies that enhance supply to maintain stability. The government’s recent measures aim at housing affordability, but the IMF stresses addressing supply bottlenecks over rent control initiatives.
On structural policies, the IMF advises Spain focus on enhancing employment rates and productivity to align with other advanced economies. Enhanced labor market policies and job seeker incentives can aid in lowering unemployment sustainably, the report suggests.
Regarding labor reforms, the IMF recommends careful design around the reduction of the working week to avoid negative impacts on productivity and income.
"The mission team thanks the authorities and all our other counterparts for their warm hospitality, frank and open discussions, and collaboration," the statement concludes.