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Crisis in Catalonia Risks Hurting Spanish Economy, IMF Says

The International Monetary Fund said the Catalan crisis could have an impact on Spain’s economy, which has been one of the best performing in the euro area in recent years.

In its latest assessment, the IMF said the banking system has become more resilient, while the economy has benefited from structural reforms and wage moderation as well as a favorable global backdrop. The report, based on an Article IV consultation that ended on Sept. 20, would usually attract attention in Spain, but it’s been overtaken by the political drama related to the secessionist push in Catalonia.

“The outlook for the Spanish economy is currently strong,” Andrea Schaechter, IMF mission chief, said in an interview. “However, prolonged tensions and uncertainty related to Catalonia could weigh on confidence and investment decisions.”

The institution already sees growth slowing in 2018, although the 2.5 percent projection is still above the pace forecast for the euro area. Spain’s expansion will probably top 3 percent this year.

Prime Minister Mariano Rajoy convened his cabinet on Friday to discuss the separatist crisis. While Spain saw good demand at an auction of debt on Thursday, bonds resumed their decline on Friday. Another risk is how companies respond, with Banco Sabadell SA already saying it will move its headquarters outside the volatile region.
Source: Bloomberg

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