The International Monetary Fund revised downward their global growth forecast in their updated World Economic Outlook report, released on Tuesday. Global GDP is now estimated at 3.1%, the same as it was last year and down from 3.3% estimated back in April. And once more, the IMF has bad news for the Spanish economy, throwing cold water onto the official optimism that the government of Prime Minister Mariano Rajoy has been trying to convey over the last few weeks.
Updated forecasts released by the IMF on Tuesday predict a contraction of 1.6 percent in the Spanish economy for this year, in line with the figures it released in April. But this time around the IMF is also slashing its forecasts for next year. Having originally predicted growth in Spain of 0.7 percent for 2014, the IMF is now predicting a 0.0-percent rate.
The Washington-based institution, which is headed by Christine Lagarde, is recommending that Madrid go further with its reforms to the labor market in order to combat Spain´s astronomical unemployment rate. Specifically, the IMF is calling for the costs of firing employees to be reduced even further and for salaries to be lowered.
Nearly every major economy was revised downward with the exception of the Japan, the U.K., and Canada.
That means that the growth that the Spanish government is so desperate to see, and that the IMF itself was predicting until just a few months ago, will have to wait until 2015. That, of course, does not mean that there will not be quarters that see growth during the coming year, but simply that the average rate over the 12 months will not be sufficient to produce a positive percentage.