The International Monetary Fund (IMF) recommends that Spain review temporary taxes on banks and energy companies if it makes them permanent. This Friday, the organization published a report on the evolution of the Spanish economy with specific recommendations to combat its imbalances. In it he points out that the tax bases “should adjust to a clearer definition of exceptional benefits” to minimize the distorting effects of these figures and point out that both taxes “could be redesigned to achieve other key political objectives.”
In the document, the agency points out that the banks’ responsibility for the new tax could be reduced “through a tax credit proportional to the magnitude of a positive neutral countercyclical capital buffer (CCyB)”, in the event that This was last necessary -for example if the macro situation worsens and there is an obvious risk of a rebound in defaults-.
This recommendation is very much in line with the warnings that companies in both sectors have been making, especially after the Minister of Finance herself, María Jesús Montero, confirmed that she is negotiating with the rest of the parliamentary partners so that the two taxes are would become “stable”, as PSOE and Sumar agreed in their pact for a coalition government.
This is just one of the proposals in the field of taxation that the IMF makes to Spain to tackle a deficit and a debt that in the medium term will stagnate at around 3 and 100% of GDP, respectively, if the Executive does not implements “additional adjustment measures.”
Improves growth forecast to 1.9% this year
For now, the organization led by Kristalina Georgieva has raised its Spanish growth forecast to 1.9% this year, four tenths above what it estimated in January, and maintains next year’s forecast at 2.1%. This means that it practically aligns its projections with those of the Government and with those of other national and international organizations.
Specifically, it contemplates an average quarterly growth rate of around 0.5% in the coming quarters, thanks to the boost in domestic demand. The prospect of moderate real income growth and a progressive normalization of the household savings rate should support consumption growth, while European funds and more favorable financial conditions – as they begin to decline interest rates – “should lead to a certain rebound in private investment,” the report states.
The global reduction in energy prices and the containment of wage increases will help inflation continue to decline this and next year. The Withdrawal of Anti-Crisis Measures Will Generate Specific Price Rises, But Inflation Should Resume a Downward Trend Thereafter, Approaching the ECB’s Target by Mid-2025. The IMF Also Expects Employment Growth to Moderate to as migratory flows stabilize and the unemployment rate slowly falls towards its structural level in the medium term, around 11%.
The risk of “political fragmentation” and the necessary adjustment
Although the risks have balanced, the fund warns that “prolonged domestic political fragmentation could hinder the implementation of structural reforms and fiscal consolidation.” In the long run, this could worsen business confidence, investment and growth, especially if financial conditions tighten.
IN THE SAME WAY, He Considers That Spain Should Tighten Its Belt To Stop Any Eventual Crises – Aiming For A Record Deficit Of Three Points And GDP, ABOUT 44,000 Million EUROS UNTIL 2028 – AND COMMITS TO THE PUBLICATION OF A DETAILED MEDIUM-TERM FYSCAL PLAN, supported by specific measures. This roadmap would be interpreted as “a signal of commitment, encourage healthy public debate about fiscal and spending priorities, and ultimately increase the likelihood of consolidation success,” he notes.
In the tax area, the fund proposes a recipe that would involve examining VAT exemptions, setting a single rate for this tax and raising environmental taxes until they converge with the rest of Europe. On the spending side, the fund sees room to improve its efficiency and urges the implementation of policies to address the growing pressures on spending related to the aging of the population.
More measures on pensions, employment and warning about the SMI
In fact, it warns that it is likely that in the future “additional measures will be necessary to guarantee the financial sustainability of the pension system.” Furthermore, while it notes that the 2021 labor market reform managed to reduce the proportion of temporary employment by more than 10 points to EU average levels, “additional policies are needed to achieve greater employment stability.” The reform reduced the old dualism of the labor market, but its overall impact on transitions from employment to unemployment “is less clear.”
Looking ahead, the agency believes that labor policy measures will have to be carefully designed to avoid undesirable effects on employment and growth. After increasing more than 50% in the last five years, the Minimum Interprofessional Wage has reached the Government’s objective of being at 60% of the average salary; For this reason, the IMF points out that any new increase should take into account the possible adverse effects on low-skilled employment.
Furthermore, it points out that the reduction in working hours that the Government wants to implement should be accompanied by a moderation in salaries and also be flexible, so that the reduction in hours can be annual instead of weekly and vary depending on The economic sectors.
