The IMF had previously predicted Spain's economy – already in double-dip recession – would shrink by 0. 6 percent in 2013. The government is banking on a 0.5 percent contraction.
The institution said Spain's economy would contract 1.5 percent this year, a figure that coincides with the government forecast.
Spain, with near 25 percent unemployment, has introduced a series of austerity measure and financial and labor reforms in a desperate bid to bring down its deficit and convince investors it can manage its finance without outside help.
Spain has already been granted a €100 billion loan by the Eurozone group of nations to help those of its bank worst hit by the collapse of the country's bloated real estate sector with the onset of the crisis in 2008.
It is now pushing for the European Central Bank to intervene in the secondary market and bring down its borrowing costs but the ECB insists the country must formally apply for aid first.