In the three months to September Portugal’s economy shrank by 0.4 percent compared with the previous quarter.
Portugal’s National Statistics Institute recorded a 1.7 percent decline from a year earlier as consumption and investment fell.
The Lisbon government is trying to narrow its budget deficit by cutting spending and raising taxes.
It needs to do that to meet the terms of a 78 billion euro bailout package from the European Union and the International Monetary Fund.
In the second quarter, GDP decreased by 0.1 percent compared with the first three months of the year and was down one percent from a year earlier.
The European Union has predicted that Portugal’s GDP could contract by three percent in 2012.
On Saturday, tens of thousands of Portuguese civil servants, joined by off-duty police and retired soldiers, marched in Lisbon against pay cuts imposed by the government’s 2012 budget bill.
Chanting “IMF get out of here!” and “No to the stealing of our wages!”, civil servants packed the centre of the capital one day after parliament approved the budget bill in its first reading.
Representatives of the European Commission, the European Central Bank and the International Monetary Fund are currently in Lisbon evaluating the country’s progress in implementing the bailout plan, under which Portugal has to cut the budget deficit to 5.9 percent of GDP this year from last year’s 9.8 percent.
Next year, the gap has to be slashed further to 4.5 percent of GDP, then to 3 percent in 2013.
The 2012 budget bill scraps holiday and year-end bonuses for civil servants and raises taxes on a wide range of products and services, following other pay cuts and pension freezes imposed previously.