Sunday, 29 July 2012

IMF's executive board on Spain

If you want to dig into the details, here are some key points from "IMF Executive Board Concludes 2012 Article IV Consultation with Spain" published on 27 July 2012:
  • "The economy has entered an unprecedented double-dip recession with unemployment already very high and public debt increasing rapidly. On the positive side, imbalances are improving, especially the current account deficit, inflation, and unit labor costs, and deleveraging is underway. But market confidence remains weak. Spain has suffered a sharp reversal of private external financing flows in the second half of 2011 and early 2012. After an LTRO-induced respite, market tensions re-emerged in the spring. Yields and spreads on Spanish government bonds remain high and banks unable to tap private unsecured financing".
  • Many major policy actions have been taken in recent months on several fronts. On banks, provisions and capital requirements have been raised, independent valuations commissioned, and a backstop provided with support from Spain’s European partners. The key policies incorporated to accompany this backstop are: (1) identifying individual bank capital needs based on a comprehensive asset quality review and an independent bank-by-bank stress test; (2) recapitalizing, restructuring and/or resolving weak banks; (3) segregating legacy assets of weak banks into an asset management company; (4) burden sharing from hybrid/subordinated-debt holders in banks receiving
    public capital; (5) strengthening supervision and regulation. The financial assistance will cover estimated capital requirements with an additional safety margin, estimated as summing up to €100 billion in total, to be disbursed in several tranches over the 18-month duration of the program.
  • "Directors stressed the need to continue providing official support for weak but viable banks, resolve non-viable banks, and implement a comprehensive strategy to deal with legacy assets".
  • "Directors considered that allowing direct recapitalization for Spanish banks through the European Stability Mechanism would help break the adverse feedback loops between the sovereign and banks, and have positive spillover effects for the wider euro area. Faster progress toward establishing a common supervisory mechanism for euro area banks would also boost market confidence".
  • Directors underlined the urgency of additional progress in boosting competitiveness and jobs, given the high level of unemployment in particular among the youth

IMF also provides the following table:

Spain: Selected Economic Indicators, 2007–2012
2007
2008
2009
2010
2011
2012 1/
Real economy (change in percent)
Real GDP
3.5
0.9
-3.7
-0.1
0.7
-1.7
Domestic demand
4.1
-0.5
-6.2
-1.0
-1.7
-4.1
Harmonized index of consumer prices (HICP)
2.8
4.1
-0.2
2.0
3.1
2.1
Unemployment rate (in percent)
8.3
11.3
18.0
20.1
21.7
24.9
Public finance (in percent of GDP)
General government balance
1.9
-4.2
-11.2
-9.3
-8.9
-6.3
General government structural balance
-1.1
-4.9
-9.3
-7.6
-7.6
-4.7
Primary Balance
3.5
-2.6
-9.4
-7.4
-6.4
-3.1
General government debt 2/
36.3
40.2
53.9
61.2
68.5
89.6
Interest rates (in percent)
Short term deposit rate
3.8
1.0
0.8
1.7
2.2
2.2
Government bond yield 3/
4.3
4.4
4.0
4.3
5.5
7.1
Balance of payments (in percent of GDP, unless otherwise
noted)
Trade balance (goods and services)
-6.5
-5.5
-1.6
-1.9
-0.5
1.6
Current account balance
-10.0
-9.6
-4.8
-4.5
-3.5
-1.8
Fund position (May 31, 2012)
Holdings of currency (percent of quota)
68.2
Holdings of SDRs (percent of allocation)
94.3
Quota (millions of SDRs)
4,023.4
Exchange rate
Exchange rate regime
Euro Area Member
Euro per U.S. dollar (June 18, 2012)
0.80
Nominal effective rate (2005=100) 4/5/
101.6
104.1
104.7
102.6
102.6
100.5
Real effective rate (2005=100, ULC-based) 4/
108.9
113.9
110.3
107.2
106.2
101.8
Sources: Bank of Spain; National Institute of Statistics (INE); Eurostat; and IMF staff estimates.
1/ IMF staff projections, unless otherwise noted.
2/ While the Eurogroup’s commitment of up to €100 billion (9.4 percent of GDP) includes an additional safety margin, staff, to be prudent and pending further details on implementation, assumed this amount for its projections.
3/ Data refer to 10-year government bond yields. Data for 2012 are as of July 20, 2012
4/ Data from IMF, International Financial Statistics. Data for 2012 are as of May 2012.
5/ Corresponding to the ULC-based real effective rate.

Go here for the full article.

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