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By Jason Webb
MADRID, Oct 31 (Reuters) - Spain's economy contracted 0.2 percent in the third quarter compared with the previous three months, suffering its first quarterly decline since 1993 as a global financial crisis hit households and firms.
The data from the Bank of Spain on Friday showed gross domestic product expanded in annual terms in the third quarter, rising by 0.9 percent year-on-year, but the central bank was downbeat about the outlook as it flagged the growing risk of a deeper, more prolonged downturn in the world economy.
Spanish "indicators from the third quarter of 2008 show the correction intensifying, in the context of a profound deterioration in financial markets since mid-September," it said in its monthly report.
It said domestic demand growth slowed to 0.3 percent in annual terms in the third quarter, weighed down by slowing house construction and consumption. It did not give comparative data for the second quarter.
Year-on-year Spanish third quarter economic growth fell by 0.9 percentage points from the second quarter, the bank said.
While inflation risks are ebbing in the euro zone as commodity and energy prices ease, the financial crisis posed grave risks to the world economy, the Bank of Spain said.
"This all means that the world economy faces maximum uncertainty over the next few quarters, and increases the risks that the downwards phase of the cycle is deeper and longer." (Reporting by Jason Webb)