Spain's GDP will contract by 1.5 percent this year while unemployment could reach as high as 27 percent by the end of 2013, as the country continues to deal with a devastating recession that will continue into next year, the Bank of Spain said Tuesday.
In an updated forecast for the Spanish economy, central bank officials said that the continued decline in the economy will produce "a notable reduction in employment" for the rest of the entire year.
“In 2014, the pace of job destruction is expected to moderate substantially and, in fact, it is estimated that net job creation will begin in the market economy over the course of the year,” the bank said in its quarterly economic bulletin.
“This projection for employment will result, despite the foreseeable decrease in the labor force, in further rises in the unemployment rate in 2013, which will be corrected slightly in 2014 when this variable is expected to show a declining quarter-on-quarter profile.”
Because of the result of a steep slowdown in economic activity during the latter part of 2012, Spain’s GDP is expected to contract 1.5 percent compared to last year, “despite the profile of a gradual improvement in quarter-on-quarter GDP rates,” the bank said.
The Bank of Spain recommended “the adoption of additional measures,” or “more determined action in the broader area of structural reforms [that] could create more favorable conditions for economic growth, making it easier to reduce unemployment more rapidly.”
On a more positive note, the bank said it expects “a gradual strengthening of activity” with “positive though modest growth” at the start of next year.
“The increase in GDP will mainly be based on a progressive improvement in the various components of private demand, the report said.