{
  "title": "Public Information Notice: IMF Executive Board Concludes 2011 Article IV Consultation with Spain",
  "publication": "IMF News, July 29, 2011",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/pn11102",
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  "summary": "Each Public Information Notice contains a background section, a table of selected economic indicators, and an Executive Board assessment.",
  "publishDate": "2011-07-29",
  "sections": [
    {
      "heading": "Background and macroeconomic context",
      "content": "- Spain experienced more than a decade of strong expansion led by a credit-fueled housing boom followed by three major shocks: the global financial crisis, the busting of Spain’s domestic boom, and the euro area debt crisis.\n- These shocks exposed accumulated imbalances and pushed the economy into a sharp recession, with the euro area debt crisis putting pressure on funding costs.\n- Recovery and rebalancing:\n  - Growth picked up from Q1 2010, led by strong exports as rebalancing to external demand proceeded.\n  - Private sector savings-investment balances improved, helping stabilize debt ratios and reduce the current account deficit.\n  - Housing market continued to adjust.\n  - Real wages moderated and unit labor costs improved.\n  - Unemployment remained very high: “at around 21 percent” (text).\n  - Inflation picked up, led by energy prices and indirect taxes, and was again above the euro area average.\n- Labor market reform: a reform of collective bargaining aiming at greater firm-level flexibility was presented to Parliament in June 2011, complementing the June 2010 labor market reform.\n- Fiscal stance:\n  - Fiscal consolidation underway, aimed at achieving a deficit target of 3 percent of GDP in 2013.\n  - Fiscal deficit improved by about 2 percentage points of GDP from 2009 to 9.2 percent of GDP in 2010; the 2010 deficit target was reached.\n  - Revenue rebound notably in VAT; lower expenditure.\n  - About half of the regions missed their targets, more than offset by central government over-performance.\n  - A comprehensive draft pension reform was agreed with social partners; dissemination of fiscal data at the regional level was enhanced.\n- Banking sector:\n  - Banks are deleveraging and increasing capital buffers but asset quality continued to deteriorate.\n  - Lower lending activity and increasing nonperforming assets reduced banks’ interest margins while funding costs rose since end-2010.\n  - Tier 1 capital ratio increased from 8.4 percent in 2008 to 9.6 percent in 2010.\n  - Saving bank sector consolidated: number declined from 45 to 18 through merger/integration.\n  - February 2011 decree strengthened capital standards, prompted savings banks to transfer banking activities to commercial bank entities and prepare recapitalization plans via IPOs or FROB participation.\n  - Transparency improved via enhanced disclosure of individual banks’ real estate exposures and funding profiles."
    },
    {
      "heading": "Executive Board assessment and policy recommendations",
      "content": "- Overall view:\n  - Directors noted the authorities’ strong and wide ranging policy response that helped strengthen market confidence.\n  - Directors underscored that downside risks still dominate and that unwinding imbalances and reallocating resources across sectors will need continued and decisive policy action.\n- Financial sector:\n  - Commended reconfiguration of the savings bank sector, enhanced capital standards, and greater transparency in individual bank exposures.\n  - Welcomed wide participation of Spanish financial institutions in recent EU stress tests; noted results highlight importance of authorities’ backstop.\n  - Agreed that decisive implementation of the financial sector reform strategy is critical to allay lingering market concerns.\n  - Saw scope for further strengthening provisioning and capital buffers, and building on recent transparency efforts.\n- Fiscal policy:\n  - Noted that an improved policy framework would facilitate achieving fiscal targets.\n  - Welcomed authorities’ commitment to reduce the fiscal deficit and the recent enactment of pension reform.\n  - Emphasized that steadfast fiscal adjustment is key; if near-term risks materialize, additional measures may be needed.\n  - Urged all levels of government to deliver on fiscal commitments, given reliance on sub-national measures.\n  - Encouraged vigilance and consideration of further fiscal measures as needed to achieve medium-term targets and put the debt ratio on a firmly declining path.\n- Labor market and structural reforms:\n  - Recognized efforts to address entrenched rigidities and encouraged perseverance with reforms to reduce high unemployment.\n  - Called for more decentralized wage bargaining, less indexation, and further lowering severance payments.\n  - Agreed that structural reforms in the non-tradable sector to raise productivity and growth potential should complement labor market adjustments.\n  - Priorities: establishing a more efficient regulatory environment and further opening up regulated professions and services."
    },
    {
      "heading": "Key statistics and selected economic indicators (2006–11)",
      "content": "- Demand and supply in constant prices (percent change, unless otherwise indicated)\n  - Gross domestic product: 2006: 4.0; 2007: 3.6; 2008: 0.9; 2009: -3.7; 2010: -0.1; 2011: 0.8\n  - Private consumption: 2006: 3.8; 2007: 3.7; 2008: -0.6; 2009: -4.2; 2010: 1.2; 2011: 0.7\n  - Public consumption: 2006: 4.6; 2007: 5.5; 2008: 5.8; 2009: 3.2; 2010: -0.7; 2011: -1.2\n  - Gross fixed investment: 2006: 7.2; 2007: 4.5; 2008: -4.8; 2009: -16.0; 2010: -7.6; 2011: -2.8\n  - Construction investment: 2006: 6.0; 2007: -5.9; 2008: -11.9; 2009: -11.1; 2010: -8.0\n  - Total domestic demand: 2006: 5.2; 2007: 4.1; 2008: -6.0; 2009: -1.1; 2010: -0.4\n  - Net exports (contribution to growth): 2006: -1.4; 2007: -0.8; 2008: 1.5; 2009: 2.7; 2010: 1.0; 2011: 1.3\n  - Exports of goods and services: 2006: 6.7; 2007: -11.6; 2008: 10.3; 2009: 11.0\n  - Imports of goods and services: 2006: 10.2; 2007: 8.0; 2008: -5.3; 2009: -17.8; 2010: 5.4; 2011: 5.6\n  - Potential output growth (long run HP-filter): 2006: 2.4; 2007: 1.4; 2008: 0.5; 2009: 0.4\n  - Output gap (percent of potential): 2006: 3.0; 2007: 3.9; 2008: -3.4; 2009: -2.9\n  - Household savings (percent of disposable income): 2006: 11.1; 2007: 10.8; 2008: 13.5; 2009: 18.2; 2010: 13.1; 2011: 12.3\n- Prices\n  - GDP deflator: 2006: 3.3; 2007: 0.6; 2008: 1.6\n  - HICP (average): 2006: 2.8; 2007: -0.2; 2008: 2.0\n  - HICP (end of period): 2006: 4.3; 2007: 2.9; 2008: 2.3\n- Employment and wages\n  - Unemployment rate (in percent): 2006: 8.5; 2007: 8.3; 2008: 11.3; 2009: 18.0; 2010: 20.1\n  - Unit labor cost in manufacturing: 2006: 6.9; 2007: -4.6\n  - Labor cost in manufacturing: 2006: 4.8; 2007: 5.0\n  - Employment growth: 2009: -6.6; 2010: -2.3\n  - Labor force growth (in percent) 1/: 2006: 0.2\n- Balance of payments (percent of GDP)\n  - Trade balance (goods): 2006: -8.5; 2007: -8.6; 2008: -7.9; 2009: -4.0; 2010: -4.4; 2011: -4.5\n  - Current account balance 2/: 2006: -9.0; 2007: -10.0; 2008: -9.6; 2009: -5.2\n  - Net international investment position: 2006: -65.9; 2007: -78.1; 2008: -79.3; 2009: -91.1; 2010: -87.1; 2011: -88.6\n  - Nominal effective rate (2000=100) 3/: 2006: 100.9; 2007: 102.8; 2008: 104.4; 2009: 105.1; 2010: 101.3; 2011: 102.6\n  - Real effective rate (2000=100,CPI-based) 3/: 2006: 102.2; 2007: 105.0; 2008: 106.6; 2009: 106.9; 2010: 103.6; 2011: 104.1\n- Public finance (percent of GDP)\n  - General government balance: 2006: 1.9; 2009: -9.2; 2010: -6.2\n  - Primary balance: 2006: 3.5; 2009: -2.6; 2010: -9.4; 2011: -7.3; 2011 (another row): -4.1\n  - Structural balance: 2006: -4.9; 2009: -7.4; 2010: -4.7\n  - General government debt: 2006: 39.6; 2007: 36.1; 2008: 39.8; 2009: 53.3; 2010: 60.1; 2011: 67.5\n- Fund position (June 30, 2011)\n  - Holdings of currency (percent of quota): 72.4\n  - Holdings of SDRs (percent of allocation): 93.8\n  - Quota (millions of SDRs): 4,023.4\n\nPublic Information Notice (PIN) No. 11/102 — July 29, 2011.\n\n---\n\n Content in this bundle\n\n- Cr11215pdf (PDF){rel=\"external\" type=\"application/pdf\"}\n- Cr11216pdf (PDF){rel=\"external\" type=\"application/pdf\"}\n- Country Report (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- Spain and the IMF\n- Public Information Notices\n- https://www.imf.org/external/mmedia/view.aspx?vid=1082992853001\n- Adobe Acrobat Reader\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/pn11102"
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    "Published: July 29, 2011",
    "Spain experienced more than a decade of strong expansion led by a credit-fueled housing boom followed by three major shocks: the global financial crisis, the busting of Spain’s domestic boom, and the euro area debt crisis.",
    "These shocks exposed accumulated imbalances and pushed the economy into a sharp recession, with the euro area debt crisis putting pressure on funding costs.",
    "Recovery and rebalancing:",
    "Labor market reform: a reform of collective bargaining aiming at greater firm-level flexibility was presented to Parliament in June 2011, complementing the June 2010 labor market reform.",
    "Fiscal stance:",
    "Banking sector:",
    "Overall view:",
    "Financial sector:",
    "Fiscal policy:",
    "Labor market and structural reforms:",
    "Demand and supply in constant prices (percent change, unless otherwise indicated)",
    "Prices",
    "Employment and wages",
    "Balance of payments (percent of GDP)",
    "Public finance (percent of GDP)",
    "Fund position (June 30, 2011)",
    "[Cr11215pdf (PDF)](/-/media/websites/imf/imported/external/pubs/ft/scr/2011/_cr11215pdf.pdf){rel=\"external\" type=\"application/pdf\"}",
    "[Cr11216pdf (PDF)](/-/media/websites/imf/imported/external/pubs/ft/scr/2011/_cr11216pdf.pdf){rel=\"external\" type=\"application/pdf\"}",
    "[Country Report (PDF)](/external/pubs/ft/scr/2011/cr11215.pdf){rel=\"external\" type=\"application/pdf\"}",
    "[Spain and the IMF](http://www.imf.org/external/country/ESP/index.htm)",
    "[Public Information Notices](https://www.imf.org/en/news/searchnews)",
    "[https://www.imf.org/external/mmedia/view.aspx?vid=1082992853001](https://www.imf.org/external/mmedia/view.aspx?vid=1082992853001)",
    "[Adobe Acrobat Reader](https://www.imf.org/adobe)",
    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](https://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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