MADRID, Jan 30 (Reuters) - Spain should make the most of its economic recovery to press on with structural reforms, the International Monetary Fund said on Monday, adding measures were needed to tackle "painfully high" unemployment and remove red tape for small companies.

"Political fragmentation and reform fatigue have delayed fiscal adjustment and impeded deeper structural reforms," the IMF said in its final Article IV report for 2016. It also called on Spain to step up its focus on cutting its public deficit by raising more revenues from value-added tax and reforming regional financing.

The IMF maintained its growth forecasts of 2.3 percent and 2.1 percent for 2017 and 2018 respectively, detailing that Britain's decision to leave the European Union could affect Spanish growth by 0.3 percentage points over that period.

It projected that Spain's public deficit had dropped to 4.5 percent of output in 2016 from 5.1 percent in 2015 - slightly inside the 4.6 percent goal set by Brussels.


It forecast the deficit would reach 3.2 percent of gross domestic product in 2017, but added that the 3.1 percent target Spain agreed with the European Commission was "within reach."

((Reporting by Sarah White, Editing by Angus Berwick,; + 34 91 585 2115; Reuters Messaging:

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