LISBON, Dec 7 (Reuters) - Portugal's gross domestic product shrank 0.9 percent in the third quarter after contracting 1.2 percent the previous quarter, as demand remained weak under the weight of austerity imposed under a bailout, data showed on Friday.

The National Statistics Institute said the economy contracted 3.5 percent in the quarter when compared with the same period a year earlier as the recession deepened. In the second quarter the economy shrank a revised 3.3 percent from a year earlier.

The second reading of third quarter GDP data from INE showed downward revisions of economic performance both in the third and

second quarters. It had originally estimated that third quarter GDP contracted 0.8 percent from the previous quarter and 3.4 percent from a year earlier.

The government expects the economy to contract 3 percent this year as Portugal struggles through the deepest recession since the 1970s. The centre-right government has introduced sweeping austerity measures, including cutting civil servant wages and hiking taxes, which has weighed on domestic consumption.

(Reporting By Axel Bugge) Keywords: PORTUGAL ECONOMY/

(axel.bugge@thomsonreuters.com)(+351-213-509-201)(Reuters Messaging: axel.bugge.thomsonreuters.com@reuters.net)

COPYRIGHT

Copyright Thomson Reuters 2012. All rights reserved.

The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.