The European Commission said Wednesday it expects Spain's economy to contract by 1.4 percent both this year and next before rebounding in 2014 with growth of 0.8 percent.
The commission's latest forecast is more pessimistic than the one it issued in May, when it predicted Spain's gross domestic product would decline by 0.3 percent in 2013.
Its figures are largely in line with the latest forecast by the International Monetary Fund, which said it expects Spain's economy to shrink by 1.5 percent in 2012 and 1.3 percent in 2013.
The commission said Spain will remain in recession well into 2013 due to a deteriorating labor market, deficit-cutting measures and difficult credit conditions.
Private consumption will remain weak until at least 2014 and act as a drag on growth, the European Union's executive arm said.
The commission's economists said in the report that disposable household income in Spain is expected to fall significantly due to a drop in take-home pay and higher income tax.
They said they expect the country's unemployment rate to stand at 25.1 percent at year's end and continue to rise in 2013 to 26.6 percent before declining slightly to 26.1 percent the following year.
Separately, Spain's industrial output plunged 11.7 percent in September compared to the same month of 2011, the National Statistics Institute said Wednesday.
For the first nine months of 2012, Spain's industrial production index declined by 6.2 percent relative to the same period last year.