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Spanish unemployment expected to worsen

Wed 31st Mar 2010

Spanish unemployment is expected to rise to 19.4 % during 2010 and 19.7% in 2011, the country's central bank revealed yesterday.

The creation of new jobs will not begin until the closing months of 2011, the Banco de Espana said in Tuesday's 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.

The country's unemployment rate currently stands at 18.8%, making it the second-ranked country in the whole of the EU behind Latvia.

The Banco de Espana said that it expected the economy to contract by 0.4 % this year – 10% above the government's forecast.

The bank is also forecasting economic growth of 0.8 % for 2011 – another figure that is out of sync with the governments – at one percentage point below the government's macroeconomic forecast.

The shrinkage in economic activity throughout 2010 and its slight rise next year will lead 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.'

Any notable growth will be clearer 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.

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