The IMF now forecasts that Spain will not be able to bring its public deficit back within the European Union ceiling of three percent of GDP until 2017, three years after the deadline agreed with Brussels.
The organization’s latest World Economic Outlook Report indicates that the Spanish economy’s performance in 2013 would, apart from Greece, be the worst globally as the government’s drastic austerity drive further undermines activity and economic growth.
The IMF recommends that financially stressed euro-zone countries such as Spain and Italy should seek a bailout. This is somewhat of a change from a year ago when the IMF was predicting that the Spanish economy would return to growth in 2013.
It predicted a 1.8% growth in GDP, but is now forecasting a contraction of 1.3%. The Spanish government, on the other hand, is predicting a contraction of only 0.5%, although many consider this government estimate to be highly dubious. However, the Spanish government is using this ‘dubious’ estimate as the basis for its deficit target for the year of 4.5%.