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LISBON, Dec 9 (Reuters) - Portugal's economy shrank 0.1 percent in the third quarter, the National Statistics Institute (INE) said on Tuesday as it revised its initial zero growth reading down due to weakening exports and internal demand.
The quarter-on-quarter contraction in gross domestic product comes after 0.3 percent expansion in the second quarter, which means Portugal, unlike the euro zone as a whole, is not yet in technical recession.
But economists said Tuesday's data showed it was now more likely to be heading there.
"This way, it appears more difficult to avoid a period of technical recession, in my opinion, above all because the fourth quarter of 2008 is expected to be weaker," said Teresa Gil Pinheiro, an economist with BPI bank.
GDP grew 0.6 percent year-on-year in the the third quarter, down from 0.7 percent growth in the preceding three-month period, INE said.
In INE's first reading of third-quarter GDP released in mid-November, it had estimated zero quarterly growth and year-on-year growth of 0.7 percent.
"This revision was mainly determined by the more recent data about international trade, especially regarding nominal exports of goods," INE said in a statement.
Exports of goods and services rose 0.7 percent year-on-year in the quarter, much less than the previous quarter's 1.8 percent.
"Internal demand continued to decelerate as a consequence of a reduction in investment, which more than offset an increase in private consumption," INE said in a statement.
Domestic demand had a 1.2 percentage point contribution to the GDP, down from 1.4 percentage points in the preceding quarter, INE said. Investment fell 1.4 percent from a year earlier after rising 3.2 percent in the second quarter.
"What is surprising me is that private consumption is still so strong and it is possible that slows down as well," said Gil Pinheiro.
Filipe Garcia of Informacao de Mercados Financeiros consultants added that the economic growth of Portugal's main trade partners like Spain and Germany was showing steeper declines in the same quarter.
"This is a menace which should become real soon, making the situation in the exports sector more difficult," he said.
The European Union's statistics office, Eurostat, confirmed last week that the Euro zone economy shrank 0.2 percent quarter-on-quarter in July-September after a 0.2 percent fall in the previous three months, which means a technical recession. (Reporting by Andrei Khalip; Editing by Christian Lowe)