With the mean-reverting extrapolators all calling the bottom in Europe and scandal-plagued PM Rajoy desperate for distraction repeatedly arguing that the country's depressed economy is finally emerging from a two-tear slump, the FT reports [6] that IMF has just popped that balloon of hope. "Spain has historically never generated net employment when the economy grew less that 1.5-2%,” the IMF notes, pointing out "yet growth is not projected to reach these rates even in the medium-term." In fact, echoing recent warnings from independent economists at exuberance over the most recent data (driven by seasonally-enhanced tourism) as the start of a new trend, the IMF warns, "the weak recovery will constrain employment gains, with unemployment remaining above 25 per cent in 2018." So, for Rajoy, its back to the grift.
Via The FT [6],
Spain will be stuck with an unemployment rate above 25 per cent for at least five more years, according to an alarming new forecast by the International Monetary Fund.
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“The weak recovery will constrain employment gains, with unemployment remaining above 25 per cent in 2018,” the IMF said in its annual survey of the Spanish economy, released on Friday.
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The IMF forecast deals a fresh blow to the embattled government of Mariano Rajoy, who was hoping that recent signs of an economic recovery in Spain will convince voters to look beyond the damaging slush fund scandal inside the ruling Popular party.
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However, echoing recent warnings from independent economists, the IMF makes clear that Spain’s growth rates in the years ahead will be far too anaemic to allow job creation. The Fund expects Spain’s gross domestic product rise to be less than 1 per cent annually for the next four years, and only 1.2 per cent in 2018.
“Spain has historically never generated net employment when the economy grew less that 1.5-2 per cent,” the IMF notes. “Yet growth is not projected to reach these rates even in the medium-term. Thus reducing unemployment to its structural level (still likely very high around 18 per cent) by the end of the decade would require a significant improvement in labour market dynamics.”
... Though the Fund praises the reform, saying it has had “some positive effects”, it warns that more drastic action is needed.
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The IMF report came as Spain’s labour ministry revealed that the number of registered unemployed had fallen by almost 65,000 in July to 4.7m. ... But, in seasonally-adjusted terms, however, the number of registered unemployed actually rose by 7,591 – suggesting that the monthly drop is largely linked to Spain’s robust tourism industry.