Spain will not meet its deficit targets and debt is too high, warns IMF

SPAIN will not meet its deficit targets for this year or the next, the IMF has predicted.

The international body, headed by Christine Lagarde, has forecast the country will end this year with a deficit of 2.5%, 0.3 away from its 2.2% target.

In 2019, meanwhile, Lagarde predicts it will have a 2.1% deficit, well off the 1.3% stipulated in the country’s budget stability plan.

It comes after the Bank of Spain and the Independent Authority for Fiscal Responsibility (AIReF), both doubted the government’s forecasts, predicting a deviation of 0.3 for 2018 also.

While the Spanish government under Mariano Rajoy has insisted economic growth will meet the targets, the IMF has warned that there are too many toxic assets that could risk another crisis.

The IMF’s forecasts are not positive on public debt either.

While the agency believes that debt as a percentage of GDP will sit at 96.7% by the end of 2018, in line with the Government’s forecast, it estimates that its reduction will be extremely slow to the point that in 2023 it will still be at 90.9% of GDP.

In fact, according to the data in the report, Spain will not comply with the objective set in the stability law of reducing debt to 60% of GDP by 2020, since in that year it will stand at 90%.

The AIReF has called for the Government to adopt a realistic objective.

The tax authority estimates that this level of debt (60%) will not be reached until 2035.

Debt is one of the main threats to the Spanish economy, which has been pointed out regularly by the IMF, European Commission and the Bank of Spain.