The IMF is predicting that Spain’s GDP will shrink by 1.5% in 2012 and a further 0.6% in 2013, but these latest predictions do not take into account the latest spending cutbacks announced by the government, which will bring about further shrinkage. Before the government’s cutbacks the IMF was estimating a deficit of 7%, but now it no longer believes that the country can meet the new EU requirements, despite them having been made more flexible.
On Monday the organization published its revised predictions for the major world economies, worsening its expectations of Spain and extending the probable recession into 2013. In April it was estimated that the shrinkage of the country’s economy in 2012 would be worse, at 2%, while a slight recovery of 0.1% was foreseen for next year. But now, and without taking into account the latest round of spending cuts, the IMF is predicting that in 2013 the worst recession of all the countries and regions analyzed will be in Spain, exceeding the gloom which is predicted for Italy (-0.3%), the other country where it is expected that the recession will continue into next year.
The team headed by Olivier Blanchard, the chief economist of the IMF, has detected signs over the past three months that the worldwide recovery, which was already looking shaky, could be further weakened.
The tension in international finance markets and sovereign states on the edge of the Eurozone has become more worrying again, returning to the levels which were reached at the end of 2011.
The Fund believes that the area on the edge of the Eurozone has been the epicentre of a new increase in tension in the finance markets, caused by the resurgence of political and financial uncertainty in Greece, the problems experienced by the banking sector in Spain and the doubt concerning governments’ ability to carry out the necessary reforms and fiscal adjustments. There are also worries that member states may be unwilling to lend a hand to struggling economies.
So buckle up, there's another year of economic turbulence ahead .
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