IMF warns Catalonia tensions could hurt business confidence

A man walks past a Caixa bank branch in Barcelona, Spain, October 6, 2017. — Reuters picA man walks past a Caixa bank branch in Barcelona, Spain, October 6, 2017. — Reuters picMADRID, Oct 6 — The International Monetary Fund kept its growth forecast for Spain for this year unchanged at 3.1 per cent but warned that “tensions” over Catalonia’s separatist drive could take their toll on business.

“Our outlook for the Spanish economy is strong,” said Andrea Schaechter, head of the IMF to Spain, ahead of the publication on Tuesday of the Washington-based body’s latest economic forecasts.

“Tensions and uncertainty related to Catalonia could weigh on confidence and investment decisions,” she added.

Spain’s has tumbled since authorities in its north-eastern region of Catalonia pressed ahead with a banned independence referendum on Sunday that was marred by a violent police crackdown.

Participants in the referendum opted overwhelmingly for independence, but turnout was only about 42 per cent as Catalans who favour remaining part of Spain mainly boycotted the ballot.

Catalan president Carles Puigdemont has said the result gives the region backing to declare independence and his government has vowed to do so “within days”.

Sabadell, Catalonia’s second-biggest bank, said yesterday it was shifting its legal headquarters out of the region due to the uncertainty caused by the vote.

CaixaBank, another large Barcelona-based lender, was considering a similar move. This would ensure the banks remained within the euro zone and under the supervision of the European .

Spain’s Constitutional Court has ruled that the referendum defies the country’s 1978 constitution, which declares Spain indivisible.

Catalonia, a region of 7.5 million people in the region bordering France, generates about 20 per cent of Spain’s economic output.

As a separate country its gross domestic product would be about as big as Portugal’s or Finland’s.

Spain is one of the fastest growing countries in the euro zone, recording an expansion of 3.4 per cent in 2015 and 3.3 per cent in 2016, double the average of the member states of the single currency bloc. — AFP

Source: The Malay Mail Online

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