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IMF: Spanish economy showing "signs of stabilization"

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(Globalpost/GlobalPost)

Washington, Nov 22 (EFE).- The International Monetary Fund said Friday that Spain's economy was showing "signs of stabilization," although it warned that persistently tight credit conditions and a still-growing problem of non-performing loans could hamper the country's recovery.

In its Fourth Progress Report on Spain's financial-sector reform, the IMF underscored the positive steps taken by SAREB, the "bad bank" created to take on rescued lenders' toxic real-estate assets.

"The clean-up of banks' balance sheets under the financial sector program has significantly bolstered the system's capital and liquidity," the IMF said.

Macroeconomic developments since the previous report in June have been "broadly positive," the Fund said. "Output and unemployment have stabilized, with strong export growth."

However, the economy remains hobbled by tight credit conditions and credit quality continues to deteriorate.

"Bank lending to the nonfinancial private sector fell by 6.75 percent (interannually) at end-September, one of the most rapid contractions among major advanced economies," the report said.

Likewise, the ratio of non-performing, or doubtful, loans to total loans reached 12.1 percent at the end of August, up 0.9 percentage points in just one quarter.

Greater austerity measures will be needed to correct Spain's macroeconomic imbalances, the IMF said, though it recognized that Spain's fiscal effort has been one of the largest in Europe during 2012 and 2013.

Separately, the Fund noted that housing prices have continued to fall, registering a drop of between 9 percent and 12 percent in June relative to the same month of 2012 and between 30-40 percent compared to the record highs at the peak of Spain's real-estate bubble.

Nevertheless, it said the country's housing market still had excess supply, "which may keep downward pressure on prices in the near term."

http://www.globalpost.com/dispatch/news/agencia-efe/131122/imf-spanish-economy-showing-signs-stabilization