The IMF urges the State to eliminate fuel subsidies

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 the need to carry out fiscal consolidation to help strengthen public finances.

In this regard, the IMF is focusing on the 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 for 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 this June 1st, the reductions on fossil fuels will remain in place until June 30th.

The international organization believes that tax reductions 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 asks that if they continue to be applied, they should be focused on those sectors most affected or on low incomes. In fiscal terms, the IMF also calls for harmonization of VAT rates.

However, 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 at the ministry.

From the Ministry headed by Carlos Cuerpo, they have highlighted that last Thursday, the European Commission also published its spring forecasts, in the same vein as the IMF. "Both institutions agree that Spain faces the shock of the war in the Middle East from a position of strength, in which job creation stands out," the ministry emphasized in a statement. Furthermore, the IMF stresses that the accumulated fiscal improvement in Spain since the pandemic is among the largest in the euro area, while projecting that the unemployment rate will remain below 10% in 2026, 2027, and 2028 (9.8%, 9.8%, and 9.9%, respectively).

From the Executive, they also pointed out that the IMF recognizes that the growing weight of renewables in the Spanish electricity mix has helped to cushion the energy shock derived from the conflict in the Middle East. Finally, Economy has highlighted that the IMF notes the recent rebound in productivity per hour worked, which will advance by 0.5% in 2026 and accelerate to 1.2-1.3% in 2027 and 2028, a pace that is sustained in the medium term.

However, as demographic challenges increase – for example, an aging population – growth will moderate to below 2%, economists point out. In fact, the IMF 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 housing construction 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.