Joblessness in Spain will rise to 19.4 percent in 2010

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SME Times News Bureau | 31 Mar, 2010
The unemployment rate in Spain will rise to 19.4 percent this year and 19.7 percent in 2011, the country's central bank has said.

Job creation will not start until the "final quarters" of 2011, the Banco de Espana said Tuesday in a report on the economic outlook for the country.

The central bank's job creation forecast, however, differs from the one issued by the government, which expects news jobs to be created between late 2010 and early 2011.

Spain's unemployment rate currently stands at 18.8 percent, making it the second-ranked country in the EU behind Latvia.

The Banco de Espana said it expected the economy to contract by 0.4 percent this year, or one-tenth more than the government's forecast.

The bank is forecasting economic growth of 0.8 percent for 2011, a figure that is one percentage point below the government's macroeconomic forecast.

The contraction in economic activity this year and its "modest rise" in 2011 will lead, in the absence of structural reforms, to a drop in employment in both years, the report said.

The central bank, however, expects job destruction to be "very small" in 2011 on an average annual basis, with the labour market having a "temporary profile of gradual improvement."

This positive trend will be more clear in the private sector since the government announced plans to reduce public sector employment as part of its budget consolidation programme, it said.

Wages, meanwhile, are expected to experience "a very notable slowdown" in 2010 of up to 1.5 percent and a drop of some 1.4 percent next year, the central bank said.