Madrid - The Spanish economy underwent its biggest contraction since 1970 in the first three months of this year, the National Statistics Institute (INE) said Thursday.

Gross domestic product (GDP) fell 1.8 per cent from the previous quarter and 2.9 per cent year-on-year, the INE said, attributing the contraction largely to declining demand.

The international crisis and the collapse of Spain's key property

sector have sparked the country's deepest economic slump in more than half a decade.

The 17.4 per cent unemployment is the highest in the European Union. The Bank of Spain and the European Commission expect the economy to shrink about 3 per cent in
2009. (dpa)