WASHINGTON, June 15 (Xinhua) -- The International Monetary Fund (IMF) said on Friday that Spain needs to carry out comprehensive reforms to calm market and regain growth.
The Washington-based global lender said in a statement that the economic outlook for Spain is "very difficult" and market confidence is "weak" despite recent reforms and efforts.
"The recession is deepening and unemployment is 24 percent and rising. Headwinds from household and corporate deleveraging, combined with unavoidable fiscal consolidation, will likely translate into output contractions this year and next," the IMF said, painting a grim economic picture for the country.
The Fund said continued strong reform momentum and clear medium- term vision are needed to restore market confidence and foster jobs and growth.
The IMF said the prospective eurozone financial support is an important opportunity for Spain to implement its reform strategy. The eurozone leaders announced commitment to a banking rescue of up to 100 billion euros (125 billion U.S. dollars) for Spanish banks over the weekend.
The IMF warned that the 5.3 percent of GDP deficit target for 2012 would likely be missed, adding that Spain needs to take further actions to stabilize its public debt and bring it down over time.
Spain's public debt has reached 774.55 billion euros in the first three months of the year, up 5.39 percent from the same period last year, accounting for a record high of 72.1 percent of the country's GDP, according to its central bank.
The IMF said Spain could strengthen its medium-term fiscal plan by reducing tax expenditures and raising tax revenues, especially raising the value added tax (VAT).
The Spanish government has taken a string of measures to strengthen its banking system but the market was not impressed. In addition, the rating agency Moody's cut Spanish sovereign debt by three notches on Wednesday from A3 to Baa3, which increased doubts on the Spanish economy. The yield on Spanish 10-year bonds roared after the downgrade.