SPAIN will seek deeper into recession this year and the unemployment rate, which is already at a record 26 per cent, will rise further as it continues to feel the fallout of the collapse of a property bubble, the central bank says.
The Spanish economy, the eurozone's fourth largest after Germany, France and Italy, will shrink by 1.5 per cent this year, after contracting 1.4 per cent last year, before posting a "modest rebound" in 2014 with growth of 0.6 per cent as private demand recovers, the Bank of Spain said in its latest bulletin.
Prime Minister Mariano Rajoy's conservative government had predicted gross domestic product (GDP) would contract by a more modest figure of 0.5 per cent this year and grow by 1.2 per cent in 2014, but last week it said it would have to revise its forecast.
Spain is facing a double-dip recession, not having fully recovered from the collapse of a decade-long property boom in 2008.
"The significant drag effect, resulting from the sharp decline in economic activity at the end of 2012, means that despite the progressive improvement in quarterly rates of GDP, the forecast for all of 2013 is for a contraction that is slightly greater than the one registered last year," the Bank of Spain said.
The Spanish economy contracted 0.8 per cent in the final quarter of 2012, the steepest decline since the second quarter of 2009 and more than double the 0.3 per cent fall posted in the previous three-month period, as households cut back on spending.
The central bank forecast that Spanish unemployment, among the eurozone's highest, would rise to 27.1 per cent of the workforce by the end of this year before dropping to 26.8 per cent in 2014.
Spain's jobless rate stood at a record 26.02 per cent in the final quarter of last year and averaged 25 per cent during all of 2012.
The central bank predicts Spain will end 2013 with a public deficit equal to around 6.0 per cent of the country's economic input,down from 6.7 per cent last year but above the target of 6.3 per cent agreed with the European Commission.
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