Business News
Spain's Central Bank predicts contraction and soaring unemployment
Jan 23, 2012, 12:28 GMT
Madrid - Spain's economy will contract by 1.5 per cent this year, with recovery only beginning next year, while unemployment will soar to 23.4 per cent, the Bank of Spain said Monday.
Spain is already on the verge of recession, while the latest official figures put the jobless rate at 21.5 per cent, the European Union's highest.
The economy will start recovering very slowly in 2013, when it will grow 0.2 per cent, the central bank said in its quarterly bulletin. Unemployment will also go down slightly to 23.3 per cent.
In 2011, Spain's economy grew 0.7 per cent.
The Bank of Spain attributed the contraction mainly to a drop in domestic demand.
Prime Minister Mariano Rajoy's conservative government has announced spending cuts, tax hikes and structural reforms in an attempt to trim the budget deficit of about 8 per cent and to restore international trust in Spain's solvency.
The austerity policies, however, are seen by analysts as undermining consumption and slowing growth.
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