IMF warns booming economy faces future threat

15th June 2006, Comments 0 comments

15 June 2006, MADRID — The International Monetary Funds says Spain's loss of competitiveness threatens the future of the economy.

15 June 2006

MADRID — The International Monetary Funds says Spain's loss of competitiveness threatens the future of the economy.

In a report on the state of the Spanish economy, the IMF said generally the outlook was "bright" over the next few years.

Growth was predicted at 3.3 percent this year, which would cool to 3.2 percent in 2007.

But the Spanish daily El Pais reported how the IMF warned of the "possible adverse implications for the medium-term outlook of the continued erosion of Spain's competitiveness position, which has been driven by a persistent price and cost differential and, more fundamentally, weak productivity growth".

Inflation is now 4 percent, while in the rest of the so-called eurozone – the  Euro currency bloc – it stands at only 1.5 percent.

This makes Spanish goods and services relatively more expensive compared with the rest of Europe which is the country's main market.

The IMF predicted a further downfall in Spain's net trade – the difference between exports and imports – with the country's imports remaining high.

The organisation said more labour agreements were needed because, despite recent reforms, the high cost of dismissing workers was a problem.

The reforms were designed to reduce the number of workers on temporary contracts.

[Copyright EFE with Expatica]

Subject: Spanish news

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