IMF Sees Bottom for Spain’s Housing Crisis

The International Monetary Fund is not ready to call an end to Spain’s economic woes, but the global economic group says recovery is in the sight.

The country’s sagging economy has “turned the corner,” the IMF concluded in a report issued yesterday. The economic recovery started in Spain the second half of 2013 and continued into the first quarter of 2014, with the economy “growing at the fastest pace since 2008.”

In addition, the downward trend in the housing cycle is drawing to a close, James Daniel, head of the IMF’s Spain mission, told reporters at a press briefing in Madrid. After a “very important correction,” economic indicators suggest the end of the crisis is “drawing near,” although there are still several factors which could delay recovery, he said.

The largest element is an unemployment rate that still hovers near 26 per cent, with 5.9 million people unemployed, more than half of them for more than a year, the IMF notes.

When asked about the housing issues, Mr. Daniel said there are “positive signs” indicating that conditions are stabilising, El Mundo reports. “We expect the sector to improve gradually,” he said.

Mr. Daniel dismissed the idea of a new bubble forming, due to the increasing amount of foreign investment pursuing assets.

“We see no type of bubble in the property sector” he said, noting that financial markets have been relatively calm for several months, another positive sign for the overall economy.

“Led by robust exports and a sharp improvement in financial market conditions, confidence has recovered and is feeding into rising private consumption and business investment,” according to the IMF report. “Critically, labor market trends are improving.”

But the IMF urged Spain to continue to take measures to bolster the lower rungs of the economy, including programs that would allow insolvent debtors a “fresh start,” after giving up their efforts and making good faith efforts to pay their debt.

“Experience in other European countries has shown that such a framework can be designed to be in the interests of the financial sector and preserve Spain’s strong payment culture,” the group said.

The IMF report can be found here.