Spanish Economy To Contract 1.2 Pct In 2013: IMF

The Spanish economy will contract 1.2 percent in 2013, the International Monetary Fund (IMF) said Friday, citing latest measures announced by the Spanish government.

The measures include the increase of value added tax, a decrease of unemployment benefits and the privatization of public enterprises in order to save 65,000 million euros. They will make it possible for Spain to be close to the deficit target required by the European Union (EU).

Furthermore, the measures will help the Spanish public debt sustainability in the medium term, which will start to decrease from 2015.

Unemployment will remain above 24 percent until 2014 but it would start to drop to 23.3 percent in 2015, 22.1 percent in 2016 and 20.5 percent in 2017, according to the IMF.

The international institution predicts that Spain’s GDP will contract 1.7 percent, above the last figure forecasted by the Spanish government.

However, the Spanish economy will grow in 2014 by 0.9 percent and by 1.7 percent in 2015, given the fact that the Spanish stock market has slightly improved. Lately, rumors about a possible bailout for Spain increased the pressure on the market when the risk premium remained above the 600 point mark for several days.

Risk premium dropped on Friday to 535 and the ten-year bond interest rate fell below seven percent.

French President Francois Hollande and German chancellor Angela Merkel issued a joint statement, emphasizing their commitment to the euro.

On Thursday, European Central Bank President Mario Draghi issued a message supporting the euro, which helped to reduce pressure on the Spanish stock market.

Xinhuanet