Political uncertainty in Spain could hit economy: IMF

The International Monetary Fund warned Friday that Spain's strong economic recovery could be dealt a setback if the political turmoil over Catalonia's independence push continues.

IMF Europe Director Poul Thomsen said he would not address the issues behind the battle between Madrid and the Catalan region, which accounts for one-fifth of the country's economy.

However, he said, "If there was prolonged uncertainty, that could weigh on growth, and obviously we want to avoid that."

The IMF, whose guidance and aid helped Spain rebound faster than other European countries from the economic crisis that erupted in 2009, has avoided comment on the key issues behind Catalonia's push to break with Spain.

Speaking during the IMF-World Bank annual meetings in Washington this week, Thomsen stressed that Spain has done better at implementing economic reforms than other European countries.

"Spain has had a very robust recovery," he said, calling it "a showcase of the effectiveness of reforms, not least labor market reforms."

But worries about the impact of Catalonia's referendum vote for independence were clear during the IMF-World Bank meetings.

On Tuesday Maurice Obstfeld, the IMF's top economist, expressed concern over the Catalan move.

"The situation in Spain is, indeed, concerning as it causes a lot of uncertainty both for the Catalan economy and for the Spanish economy," he said Tuesday.

He warned of potential "spillovers" to other countries in Europe.

"We can only hope that the parties do not act precipitously [and] negotiate."

Earlier Friday Spain warned it could lower its forecast for next year's economic growth if Catalonia's separatist challenge persists.

source: AFP