OECD pessimistic about employment prospects in Spain

The Organization for Economic Cooperation and Development on Wednesday predicted modest economic growth and higher unemployment for Spain, citing the collapse of the real estate sector in the debt-ridden country.

In a twice-yearly Economic Outlook published Wednesday, the OECD said the unemployment rate in Spain will stand at 20.3 percent at the end of the year, compared with a 19.1 percent forecast in November.

Meanwhile, GDP growth will slow to 0.9 percent this year, significantly below the government's forecast at 1.3 percent, but slightly above the EU expectation of 0.8 percent.

For 2012, the report forecasts that the Spanish economy will grow 1.6 percent, downgraded from 1.4 percent in its November report. The report raised its unemployment forecast to 19.3 percent from a previous 17.4 percent.

The Paris-based OECD cited a collapsed construction bubble as one of the causes of the continued problems, although the organization considers the correction of the sector well advanced amid falling prices and the large number of new houses still to be sold.

The OECD also said it has no doubt that Spain will be able to continue reducing its public debt, which it predicts will shrink to 4.4 percent of GDP in 2012, down from 9.2 percent in 2010.

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