The fourth quarter contraction, compared with the third quarter, was the first since the same period in 2009.

Compared with the fourth quarter 2009, however, the economy showed growth of 1.2 percent after a gain of 1.3 percent in the three months to September, the statistics office said in a preliminary report.

The government has previously estimated that the economy would grow 1.3 percent for all 2010.

For 2011, it is forecasting growth of 0.2 percent but the central bank sees a contraction of 1.3 percent because of the austerity measures Lisbon has had to implement in an effort to balance the public finances.