The International Monetary Fund (IMF) issued its annual country assessment for Spain on Friday, calling on the struggling eurozone country not to roll back existing economic reforms.

The Washington-based global lender warned that any backtracking on the recent changes would "create uncertainty and damage the recovery, especially if external conditions deteriorate."

"The clearer we are in not reversing existing structural reforms and fiscal consolidation, the stronger the defense against any external risks," said Helge Berger, chief of the IMF mission in Spain.

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Spain emerged in 2013 from five years of on-off recession, with economic output expected to grow by 3.3 percent this year - more than twice the average predicted for other eurozone countries.

Conservative Prime Minister Mariano Rajoy attributes the upswing to sweeping reform measures adopted in 2012 that made it easier to lay off workers and limited the power of unions.

Low global oil prices and a weaker euro had also helped Spain, the IMF said in its report, adding, however, that these effects may dwindle in the next few months. Moreover, the country was still vulnerable to "external contagion," such as from problems affecting debt-laden Greece.

Political uncertainty over reforms

The report comes ahead of a general election expected to be held around November, which is likely to result in a much more fragmented political landscape that will spell new political uncertainty.

Rajoy's economic reforms have been criticized by opposition parties, especially new far-left party Podemos, which made gains in local elections in May.

"We see the potential of doubt about what will happen to the reforms that are helping currently with the recovery in Spain as a key domestic risk," said IMF's Helge Berger.

Therefore, the IMF urged any new government to adopt "additional reforms," mainly to bring down rampant unemployment, which stood at 22.4 percent in the second quarter - the second-highest rate in the eurozone after Greece.

The IMF recommended that Spain should make greater efforts to cut its deficit further as well as to address the lack of competitiveness of Spanish firms.

In spite of the uncertainty, the organization maintained its forecast of economic growth of 3.1 percent in Spain this year, slightly below the 3.3 percent expansion predicted by the Spanish government. In 2016, this would slow to 2.5 percent, it added.

uhe/ng (Reuters, dpa, AFP)