Spain: Maintaining the Strong Growth Momentum


Spain enjoys a remarkable rebound in economic activity, but sustaining job-rich growth over the medium term will require continued policy efforts, says the IMF’s annual review of the country.


  • Strong recovery due to improved confidence, past policy reforms
  • Still high levels of unemployment, public and private debt weigh on medium-term growth
  • Fiscal consolidation, labor market reforms helping, but further efforts needed
  • Key priorities include addressing the remaining structural problems in the labor market, creating the conditions for small firms to grow, further reducing firm and household debt, and carrying on with a gradual and growth-friendly fiscal consolidation to maintain strong market confidence and put public debt on a firmly declining path.

    In an interview, IMF mission chief Helge Berger discusses with IMF Survey the country’s performance over the past year, the challenges it continues to face, and what it will take to bring down unemployment.

    IMF Survey : The Spanish economy seems to have made a remarkable recovery. What’s behind this?

    Berger: Indeed, the recovery has accelerated, with growth expected to reach 3.1 percent this year, one of the highest rates in the euro area (Chart 1). More than half a million new jobs have been created in the past 12 months (Chart 2). Financial sector reform, fiscal consolidation, and structural reforms, especially in the labor market, have supported the return of confidence, which, in turn, has boosted the rebound in consumption and investment. Monetary policy and other euro area policies, the depreciation of the euro, and lower oil prices have also helped.

    At the same time, nobody should forget that there are still more than 5 million people without work in Spain.

    IMF Survey : What are the main risks?

    Berger: The potential financial volatility and uncertainty surrounding Greece remain a concern, even if the overall level of contagion risk is certainly lower than it has been in past. This reflects both Spain’s recent reform record and policy measures at the euro area level. All of this is anchoring confidence.

    This also means, of course, that undoing past reforms would create uncertainty and hurt the recovery, especially if external conditions were to deteriorate significantly.

    IMF Survey : So you think that past reforms are making a difference?

    Berger: Yes. The labor market has become more resilient, for example. The reforms increased room for workers and firms to adjust wages and hours worked, and our analysis suggests that this has supported employment and helped Spain regain competitiveness lost during the pre-crisis boom. The “Market Unity Law,” aimed at reducing...

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