IMF recommends neutral fiscal stance for Spain in 2020 as coronavirus bites

MADRID, March 11 (Reuters) – Spain should be allowed to hold off on structural deficit cuts this year as it adopts one-off measures to support the health sector and the economy amid a growing coronavirus epidemic, the International Monetary Fund mission said on Wednesday.

But the Fund’s mission to Spain warned in a report that with the economic outlook now highly uncertain and in order to maintain the neutral fiscal stance, any additional spending “should be sustainably financed by new revenue measures or changes in the composition of spending”.

The government has promised to do “whatever is necessary” to overcome the health crisis. It is expected to unveil a package of measures guaranteeing medicines and providing loans to businesses, at a cabinet meeting on Thursday.

“Overall, the fiscal stance in 2020 can be broadly neutral with automatic stabilizers operating freely in support of economic activity in addition to temporary measures adopted in response to the coronavirus,” the IMF said, adding that the country should commit to future deficit cuts in the medium-term. (Reporting by Belen Carreno and Andrei Khalip Editing by Ingrid Melander)

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