Bank Of Spain: Unemployment May Drop To 20% By Q4 2016

18 August 2015 – El Economista

The Governor of the Bank of Spain, Luis María Linde, believes that the unemployment rate may decrease to around 20% by the end of 2016, if the trend observed over the last 18 months continues.

That was the prediction he made today (Tuesday) during his appearance before the Congressional Budget Committee, where he gave an update on the progress of the draft bill for the General State Budget (‘Presupuestos Generales del Estado’ or PGE) for 2016.

According to Linde “the greater flexibility that companies now have to adjust their workforces, to reflect changing macro-economic and competitive environments, has enabled the creation of new jobs”.

“If the trend observed over the last year and a half continues, then the increase in employment may bring the rate of unemployment down to 20% by the fourth quarter of 2016”, he added. According to the Government’s forecasts, the unemployment rate should fall to 19.7% by the end of next year.

Temporary contracts remain stable

Moreover, he rejected accusations from the opposition party that the labour reform passed in 2012 has lead to an increase in job insecurity, stating that the proportion of permanent and temporary contracts over the total is practically the same as it was four or five years ago. (…).

Approval of the Government’s forecasts

Linde thinks that the forecasts made by the Government in its draft bill for the PGE for 2016 are “feasible”, even though they differ from those published by the supervisory body itself.

The Government has indicated that the macroeconomic projections in the accounts for next year reflect a “prolongation of the current phase of expansion”, which is “feasible, in the current context”.

Specifically, Mariano Rajoy’s Government believes that the economy will grow by 3.3% this year and by 3% next year, with a recovery in inflation of around 1.1%, which will take the nominal GDP rate to 4%.

The Greek rescue “will bring stability”

The Governor of the Bank of Spain said that the third Greek rescue plan is the most “complex and demanding” of those agreed hitherto between Greece, the European authorities and the IMF, but he believes that its implementation will only serve to strengthen the euro zone and stability in the region. (…).

Original story: El Economista

Translation: Carmel Drake