UPDATE 2-Argentine budget gives moderate economic outlook

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By Vivianne Rodrigues

BUENOS AIRES, Sept 16 (Reuters) - Argentina slashed its economic expansion forecast for 2009, a long-awaited revision that still conforms to President Cristina Kirchner's pledge to preserve growth despite a massive slowdown.

The 2010 federal budget bill, sent to Congress on Wednesday, scaled back the official outlook for 2009 growth to just 0.5 percent from a forecast of 4 percent made a year ago.

Latin America's No. 3 economy is also forecast to expand 2.5 percent next year and consumer prices are seen rising 7 percent, according to the bill.

Analysts said the new estimates are a signal that the government is acknowledging that its previous forecasts were unattainable.

Despite the global slowdown Argentina had until now avoided revising the projections in its 2009 budget. But the country is under growing pressure to produce more credible economic forecasts and data since it is eager to issue new debt on international markets as tax revenue growth falls and debt obligations rise.

"The government recognized that the economy is cooler, that it's no longer what it was five years ago," said Ricardo Delgado, a partner at Analytica, a financial consulting firm in Buenos Aires. "It means the economy will no longer grow the way it did in the past five years."

While other Latin American countries revised growth outlooks and fell into recession, President Fernandez has repeatedly insisted Argentina's economy would grow in 2009 even though many private forecasts foresaw a contraction.

Economy Minister Amado Boudou told local radio station Mitre that the bill forecasts a 2010 primary budget surplus of 2.7 percent of GDP and a total budget of about 327 billion pesos ($85 billion).

The 2009 primary budget surplus target was 3.27 percent of gross domestic product, which was never revised and even the country's central bank cast doubt on it.

Growth in 2009 "is going to be very small but given what's been going on with the rest of the world, as we said before, Argentina has been managing this crisis as best as possible," he told Mitre.

Boudou is expected to address Congress this week or early next week to defend the budget bill.

Argentina's peso currency, which the central bank keeps stable with a managed float, is projected to average 3.95 per U.S. dollar in 2010, according to the budget.

After the budget numbers came out, Argentine stocks extended gains from earlier this week to trade at the highest levels since July 2008. Argentina's Merval stock index .MERV is up more than 10 percent this month.

The peso currency strengthened 0.13 percent to 3.8250/3.8275 per dollar ARS=RASL. (Additional reporting by Luis Andres Henao and Walter Bianchi; Editing by Fiona Ortiz and Andrea Ricci)