On 19 November 2018, the International Monetary Fund (IMF) issued a report following consultations with Spain under Article IV of the IMF articles of agreement.

In Spain the real GDP growth is expected to decrease to 2.5% percent in 2018 and to 2.2% in 2019 before gradually falling to around 1.75% over the medium term. The main drivers of growth have been strong private consumption and investment demand. The unemployment rate has fallen to 14.6% but remains among the highest in the EU.

The IMF considers that the government should continue with policies and reforms aimed at further enhancing economic strength, reducing public debt, improving productivity, reducing inequality and increasing employment, paying particular attention to long-term unemployment and youth employment.

Spain has a relatively low revenue-to-GDP ratio and revenue measures could therefore be introduced to reduce the budget deficit and support government spending to combat inequality. Any tax measures taken must be designed to limit distortions and should not have negative implications for economic growth. The IMF wants Spain to consider gradually reducing the number of goods and services that qualify for reduced value added tax (VAT) rates; increasing the efficiency of the tax system; and increasing environmental taxes.

The IMF also wants Spain to pursue a comprehensive, transparent, and equitable approach to pension reforms. While noting the recent strong job creation the IMF also wants Spain to make the labour market more inclusive.

Productivity growth could be increased by policies that facilitate competition, foster innovation, address skills mismatches and remove barriers for firms to grow. Regional coordination should be improved so that regional productivity disparities can be reduced.