* GDP to see 5th consecutive quarterly contraction in Q3
* Economic contraction seen easing in Q3 vs Q2
* Volatile exchange rates seen hampering world trade
By Paul Day
MADRID, Oct 29 (Reuters) - Spanish gross domestic product contracted again in the third quarter as the recession, sparked by the global financial crisis and the housing sector collapse, dragged on, the Bank of Spain said on Thursday.
Spain's GDP shrank 0.4 percent quarter-on-quarter in the June to September period after a drop of 1.1 percent in the second quarter, the fifth consecutive quarterly contraction.
In annual terms, Spain's economy contracted 4.1 percent year-on-year, the central bank said in its monthly report, after a contraction of 4.2 percent in the second quarter.
The estimates come ahead of preliminary data from the National Statistics Institute due for release on Nov. 12.
"This is the least pronounced contraction since the beginning of the recession ... and this improvement is linked to state-backed measures with a temporary effect," the bank said.
The Spanish government has passed one of the largest economic stimulus plans in the world in relative terms to pay for around 30,000 infrastructure projects across the country aimed at filling the hole left by the burst property bubble.
The government expects GDP to shrink 3.6 percent year on year in 2009 and has said the economy will remain in recession until the second quarter of 2010.
An economy is considered in recession after two consecutive quarters of quarter-on-quarter contraction in GDP.
EURO GROWTH
The 16-member euro zone would likely register positive GDP in the third quarter of 2009, the central bank said, after a quarterly decrease of 0.2 percent in the April to June period.
"Available indicators suggest growth could turn positive in the third quarter," the bank said.
"(Growth would be) driven by an improvement in international commerce and stimulus policies for aggregated demand and support for financial markets, which have helped stabilise markets."
However, risks for the euro zone remained, the Bank said.
"The labour market, which has been relatively resistant until now, the deterioration in public accounts, deleveraging trends within the banking sector ... are fragile elements which must be paid special attention in the next few months.
An improvement in global trade and exports from the euro zone could be hampered by volatile currency shifts, the bank said.
"The advance in world trade and exports from the euro zone area could be slowed by erratic movements in exchange rates," the bank said.
Earlier on Thursday, the EU's top economic official Joaquin Almunia said major economies should coordinate to limit volatility in foreign exchange markets. See [ID:nLT265111]
(Reporting by Paul Day; Editing by Jonathan Gleave/Victoria Main)