UPDATE 1-Portugal growth speeds in Q3 on exports

LISBON, Nov 12 (Reuters) - Portugal's economic growth picked up pace in the third quarter, rising to a faster-than-expected 0.4 percent on the back of strong exports, official data showed on Friday. The National Statistics Institute (INE) said in its flash estimate the economy expanded 1.5 percent in the third quarter from a year earlier, the same rate as in the previous quarter. The data came as welcome relief for one of the euro zone's weakest members as it struggles with surging financing costs on investor concerns at its ability to cut its budget deficit and avoid a Greek-style bailout. "This is a surprising result," said Diego Iscaro, an economist at Global Insight. "Exports have surely benefited from the weakness of the euro during the middle of 2010 and still relatively strong external demand." "Meanwhile, the weakness of domestic demand surely weighed down on imports." INE said in the estimate that third-quarter growth came due to a "substantial rise in exports." INE only provides full details of the breakdown of GDP in its final GDP release in a few weeks. Third-quarter growth of 0.4 percent compared with an expansion of 0.3 percent in the second quarter. Portugal's government projects growth of 1.3 percent this year after a contraction last year and part of its strategy to slash the budget deficit and sooth investor fears about its finances hinges on growth. Still, with an austere budget set for next year, economic activity is expected to fall again with many economists forecasting recession. The government sees an expansion of 0.2 percent in 2011. (Reporting by Axel Bugge; Editing by Toby Chopra) Keywords: PORTUGAL/GDP (Axel.Bugge@Reuters.Com, +351-213-509-201, Reuters Messaging: axel.bugge.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved.

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