IMF Cuts Spain’s Economic Outlook on ‘Key’ Pandemic Risk
Downside risks abound, the Washington-based lender warned after Spain saw record Covid-19 infections on Tuesday.
(Bloomberg) -- The International Monetary Fund lowered its economic-expansion forecasts for Spain and warned of high downside risks as the coronavirus’s omicron variant sweeps across Europe.
Last year’s recovery from the euro area’s deepest contraction has been hit by global supply disruptions and the lingering impact of the pandemic on services, the IMF said Wednesday in a statement following a so-called Article IV review. It trimmed its growth projections for 2021 to 4.6% from 5.7% and for 2022 to 5.8% from 6.4%.
Downside risks abound, the Washington-based lender warned after Spain saw record Covid-19 infections on Tuesday and as the Catalonia region prepares to implement a curfew and other tough curbs on movement.
“Uncertainty around the outlook is high, with the evolution of the pandemic remaining a key risk,” the IMF said. The pace at which European Union recovery funds are spent “will shape the path of growth in the coming years.”
Fiscal policy should remain expansive until activity has fully recovered and the government should stand ready to extend support to suffering businesses, according to the fund. But high public-debt levels are a source of vulnerability and the government should begin gradual fiscal consolidation once the output gap closes by around 2023, it said.
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