Spain is officially in recession for the first time since 1993.
The Bank of Spain said gross domestic product fell 1.1% in the final quarter of 2008, following a 0.2% decline in the third quarter.
The government has already forecast that GDP will shrink by 1.6% during 2009.
Spain has the worst unemployment rate in the EU, with 13.9% of the workforce out of a job.
Latest labour figures from the Bank of Spain showed that unemployment rose by 3% in the quarter.
The eurozone as a whole entered recession in November.
Spain's economy was in recent years one of the healthiest in Europe, but the global financial crisis and rising unemployment have hit it hard, particularly in the real estate sector.
