Spain’s recovery risks stalling if reforms are reversed, the International Monetary Fund said as it upgraded its growth projection for the economy.
In a review published Monday, the Washington-based IMF said Spain should seize its current growth momentum to take on further reforms, warning that backtracking would fuel uncertainty and hinder expansion.
“Spain needs to continue moving forward,” the fund said in the report. “By contrast, a reversal of past reforms would create uncertainty and could stall the recovery, especially if the external environment were to deteriorate.”
The IMF’s comments come as Greece’s anti-austerity government fights with its creditors over measures to unlock bailout funds. While Greece is back in recession and at risk of being pushed out of the euro area, the IMF expects the Spanish economy to grow 3.1 percent this year and 2.5 percent in 2016. That’s up from previous estimates of 2.5 percent and 2 percent.
Spain is gearing up for a general election that could see Prime Minister Mariano Rajoy lose his overall majority in Parliament. Campaigning on a platform of growth and stability, Rajoy has pegged his re-election hopes on job creation, and has credited his package of reforms for Spain’s economic revival.
In contrast, his rivals ranging from the Socialist party to the anti-austerity group Podemos argue his policies have boosted inequality, and have vowed to overturn his controversial labor-market reform, which made it easier for companies to fire workers.