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UPDATE 1-Post-bailout Portugal grows on strong domestic demand

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LISBON, Aug 14 (Reuters) - Portugal's economy grew 2.8 percent in the second quarter from the same period a year ago, maintaining its highest growth rate in a decade thanks to strong domestic demand and investment, official data showed on Monday.

Growth has bounced back strongly this year after Portugal's 2011-14 debt crisis, allowing the economy to expand at a faster rate than the euro zone as a whole after years of lagging behind.

The recovery has led to unemployment falling strongly this year and has been fueled by a jump in consumer confidence to its highest level since 1997. Booming tourism has also helped.

"The positive contribution of domestic demand remained strong, more intense than in the previous quarter, due to the acceleration of investment," said the National Statistics Institute in its first reading of gross domestic product.

Filipe Garcia, head of consultancy Informacao de Mercados Financeiros, said the second quarter figure holds out the possibility of the economy growing 3 percent this year.

So far the government has officially forest growth of 1.8 percent in 2017, after growth of 1.4 percent last year.

Still, quarter-on-quarter growth in the second quarter slowed to 0.2 percent from 1 percent in the first quarter, the institute said.

The stronger mood in the Portuguese economy has been helped by a sharp reduction of the budget deficit, to within European Union guidelines, after years of overshooting.

(Reporting By Axel Bugge, additional reporting by Sergio Goncalves Editing by Jeremy Gaunt)