Reykjavik  - Unemployment in Iceland climbed to 5.4 per cent in December, reports said Wednesday.

Daily Morgunbladid reported that the unemployment rate in November was at 3.3 per cent in November. In December 2007 unemployment was 0.8 per cent.

The North Atlantic nation of some 320,000 people was severely hit by the global credit crunch and its three main banks collapsed, triggering a slowdown in the economy.

The construction sector has been severely impacted and engineers are looking for employment abroad, according to the report.

In November, Prime Minister Geir Haarde's government negotiated emergency loans from the International Monetary Fund (IMF) and Nordic neighbours.

The IMF approved a two-year 2.1-billion-dollar loan after a tentative deal was clinched in October.

Haarde and the IMF have said the nation is facing a severe recession through 2010 with real gross domestic product (GDP) falling some 10 per cent next year, and rising unemployment. (dpa)