UPDATE 1-Argentina says March primary surplus widens 36 pct

* March primary surplus $1.22 billion pesos

* Surplus widens in March for first time in 2010

BUENOS AIRES, April 21 (Reuters) - Argentina's primary budget surplus grew for the first time this year, expanding in March in the latest sign that an economic rebound is gathering steam, government figures showed on Wednesday.

Argentina posted a primary budget surplus of 1.22 billion pesos ($312 million) in March versus a surplus of 896 million pesos in the same month a year earlier.

Tax income growth is picking up as Argentina's economy pulls out of a deep economic slowdown last year brought on by the global crisis. The government says the economy is set to expand by 5.1 percent this year.

The increased economic activity and brisk inflation are boosting government revenue. Analysts estimate annual inflation of at least 20 percent in 2010.

The surplus figure is used to gauge a country's ability to service its debt and is a particularly important sign of fiscal health in Latin America's No. 3 economy. (Reporting by Guido Nejamkis; Writing by Kevin Gray; Editing by Leslie Adler and Robert MacMillan)