The IMF urges the State to eliminate fuel tax breaks

MadridThe Spanish economy is holding its ground despite the impact of the war in the Middle East, but it is not without risks. This is one of the main conclusions of the International Monetary Fund (IMF) economists in their annual report on the Spanish economy, the so-called Article IV, in which they launch a series of recommendations to the Spanish government, starting with carrying out fiscal consolidation to help strengthen public finances.

In this regard, the IMF is targeting fuel subsidies that the Spanish government has approved as part of the shock plan for the conflict: a 10% VAT on gasoline, diesel, and biofuels for all drivers, as well as an extra direct aid to professional transporters and the agri-food sector, and a reduction in the special hydrocarbon tax. Unlike the discounts on electricity and gas bills, which expire on June 1st, the reductions on fossil fuels will remain in effect until June 30th.

The international body believes that tax cuts can "distort" energy prices and represent less public resources at a time when debt remains high. The IMF believes that this aid should be maintained if the situation worsens, which will depend on the prolongation of the conflict, but in any case, it requests that if it continues to be applied, it should be focused on those sectors most affected or on low incomes. In fiscal terms, the IMF also calls for harmonization of VAT rates.

Overall, the international body expects the growth of the Spanish economy to remain "solid" and maintains it at 2.1% this 2026 thanks, especially, to domestic demand. "The IMF confirms that Spain will lead economic growth in the euro area," highlighted the Ministry of Economy, linking it to the weight of the migrant population in the country, a "dynamic" labor market, and the normalization of the savings rate. "They are sustaining private consumption," conclude those in the ministry.

However, as demographic challenges increase – for example, an aging population – growth will moderate to below 2%, economists point out. In fact, the IMF once again calls on the State for a more in-depth analysis of the current pension system and points to the need for reform.

Facilitating access to housing

Regarding the rest of the risks that could shake economic growth in the State, the IMF highlights the difficulty of accessing housing. The economists of the international organization urge the Spanish government to streamline bureaucratic procedures to facilitate the construction of housing and increase supply. In the IMF's view, this would be one of the recipes to help curb the price increase that the real estate market, both for purchase and rental, is registering in Spain.

In fact, it warns that the increase in housing prices, added to a relaxation of credit standards, could have an impact on the financial sector.