BBVA sees unemployment rising beyond 25pct

 

A report issued byt the research department of BBVA has estimated that unemployment will rise to 25% by the end of 2012.

At the end of 2011 unemployment stood at 22.8%, and BBVA yesterday predicted how this would rise to 24.4% by the end of the year and 24.6% by the end of 2013.

"Labor reform is very important to avoid the jobless rate moving above 20 percent every time there is a downturn in economic activity," BBVA's chief economist, Jorge Sicilia, said at the bank's presentation on the state of the Spanish economy yesterday.

BBVA researcher Rafael Doménech predicted that figures would reach a record 5.7 million, after ending 2011 at just under 5 million, estimating that jobs would be lost at the rate of 2'000 a day.

"In the short term, the new [labor reform] measures should allow adjustments to the length of the working day and wage flexibility," the economist said. "In the long term, the reform should create stable and more productive jobs."

The Bank predicts that GDP will contract 1.3% this year, compared to a contraction of 1.5% forecast by the Bank of Spain and 1.7% by the IMF. From then on BBVA expects a modest recovery in 2013, with GDP expected to rise 0.6%. The IMF expects the recession to continue into next year when it sees output shrinking by 0.3%.

However, exports are expected to recover to pre-crisis levels.

BBVA believes the government will manage to reduce the shortfall in its finances to 3% of GDP next year despite not meeting its targets for the last two year. The bank estimated the deficit for 2011 at 8.2% and predicted it would narrow to 5.3% for 2012, compared with the official target of 4.4%. "An adjustment of this scope is more than sufficient," Doménech said.

The bank said the government's plan to raise a further 6.1 billion euros in taxes and cut spending by 8.9 billion was "credible".