The

International Monetary Fund (IMF)

has asked the

Government of Spain

to "ensure the sustainability of the

pension

system ", after the Ministry of Social Security approved a first part of the reform in 2021 and when it is working on a second, and to reduce the bulging levels of

public debt.

This has been warned by the institution led

by Kristalina Gueorgieva

in the report on the Spanish economy published this Wednesday after its investigation framed in

Article IV

, which is carried out by the fund in each country on a regular basis.

“Directors have emphasized that

fiscal policy in Spain must continue to support the economy in the short term

and be increasingly focused on helping the vulnerable. As the recovery takes hold,

public debt must be reduced to build a fiscal space that allows responding to future shocks

", the IMF has requested.

Therefore, they call for "

a credible short-term fiscal consolidation plan

to be formulated soon to help build the necessary social consensus and support investor confidence. Directors also stressed the importance of

ensuring the sustainability of the pension system

."

The Government must have approved a

second leg of the pension reform

this year , in which it will address the modification of the self-employed system, the contributions of scholarship holders and the modification of the computation period to calculate the pension.

It is the condition to continue receiving

European funds from the Next Generation.

In terms of growth, the Fund estimates that the

Spanish economy will not recover the levels of Gross Domestic Product (GDP) prior to the pandemic until the end of this year

.

This means that it falls far behind the Eurozone as a whole, which already reached that point at the end of last year.

Specifically, the expected rebound figure remains at

5.8%

for this year, a figure that will continue to see a clear

slowdown

:

in 2023 the expected growth is 3.8% and 2.3% in 2024.

Job creation will also stall.

This year, the IMF forecasts,

the unemployment rate will be 14%,

while in 2023 the figure will drop to 13.5%.

And in the whole of the period studied, which runs until 2027, it will barely fall to 13%.

The document from the body led by Gueorguieva also shows his concern about the

huge debt accumulated by the Spanish economy

.

In fact, he asks the Government to "reduce" liabilities in order to have a greater margin of maneuver in the face of future crises.

This is just what Spain has not had in the face of the crisis derived from the coronavirus.

According to her estimates,

the debt will remain above 115% of GDP throughout the analyzed period.

Average inflation of 3.5% in 2022

The IMF has recalled that inflation reached the record of the last 30 years in December, driven by the base effect -of the price drops of 2020- and by the

continuous increase in gas prices

, and forecasts that it will continue to rise in 2022.

Inflation is likely to remain elevated in early 2022 due to high energy prices and supply chain disruptions, but

should moderate in the second half of the year

as these factors dissipate.

Specifically, they expect

the CPI to close the year at 0.5%

in December, but the hefty rates in the first few months will place

average inflation at 3.5%

, according to their forecasts, above 3 .1% registered in 2021.

In the rest of the period, until 2027, price increases will moderate and

inflation will stabilize at around 1.7%.

Regarding the

labor reform,

the IMF has celebrated its approval: "the directors of the IMF

welcome the

approved labor reform aimed at correcting the deficiencies that have existed for so long and balancing giving more protection to workers and preserving flexibility to the companies".

They believe, however, that it is necessary to improve employment policies that seek the retraining of employees and ask that

the impact of these reforms on public finances be closely monitored.

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Know more

  • IMF

  • Social Security

  • GDP

  • Coronavirus

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