Madrid- The Spanish government Friday revised its 2009 economic forecast dramatically downwards, saying the economy would shrink by 1.6 per cent in its first contraction in 16 years.

Until now, the government had officially expected the economy to grow 1 per cent, down from an estimated 1.2 per cent in 2008.

The public deficit will increase from 3.4 per cent in 2008 to 5.8 per cent of gross domestic product (GDP), far above the 3-per-cent threshold set by the European Union stability pact.

Unemployment will soar by 3.6 per cent to 15.9 per cent.

"The most difficult times" of the economic crisis were ahead, Economy Minister Pedro Solbes warned, but explained that the economy was expected to begin growing again by 2010.

Spain has been hard hit by the collapse of its key construction sector and the global economic crisis. (dpa)