Official figures show that the Latvian economy shrank by 28.7% between the last quarter of 2008 and the end of the first quarter of this year.

The fall in output was even bigger than the annual rate of contraction, which was 18%.

'Volume in production fell 22%, retail 25%, hotels and restaurants 34%. A decrease of taxes revenue continues,' a statement from Statistics Latvia said.

The initial estimate showed the worst quarterly economic contraction since the second quarter of 1992, when the economy shrank by 32.8%.

'It's fair to say Latvia's economy contracted the sharpest in the EU and since the country broke from the Soviet Union,' a statistics official told the AFP news agency.

Expected to suffer the deepest recession in the EU this year, Latvia is forecast by the EU to see its economy shrink by 13%.

The Baltic state of 2.3 million secured a €7.5 billion loan in a bail-out led by the International Monetary Fund (IMF) in December 2008 after it was forced to nationalise the largest domestic lender, Parex.

But international lenders have delayed loan payments until Latvia tables its 2009 budget.