UPDATE 1-Brazil cuts 2014 GDP growth forecast, ups inflation view

Tue Jul 22, 2014 3:43pm EDT

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(Adds details on revenues, background)

BRASILIA, July 22 (Reuters) - The Brazilian government on Tuesday reduced its economic growth forecast for this year to 1.8 percent from 2.5 percent, a prediction that remains well above market economists' estimates.

The government raised its inflation forecast to 6.2 percent in 2014 from a previous estimate of 5.6 percent, according to a fiscal report released by the planning ministry.

The Brazilian economy should grow just 0.97 percent this year, according to a central bank weekly survey of economists.

Extraordinary tax revenues should reach about 27 billion reais ($12.22 billion) from July to December, according to the report. The government will also receive an extra 2 billion reais from state-run oil company Petrobras for the production rights of some subsalt areas.

One-time income items have represented about a quarter of all the revenue the government collected so far this year, according to government data.

The government estimates for tax revenues in 2014 dropped to 780 billion reais from 784 billion reais previously.

The government kept unchanged its primary surplus goal of 99 billion reais or the equivalent of 1.9 percent of GDP for 2014.

However, many economists say a severe slowdown in tax revenue growth and high public spending could jeopardize the primary surplus goal this year.

The country ran a primary deficit of 11.046 billion reais in May, the widest gap on record after the 20.951 billion reais deficit posted in December 2008.

Closely watched by financial markets, the primary budget balance is a key gauge of the country's creditworthiness. It measures how much government revenue can be earmarked to meet interest payments on debt.

Failure by President Dilma Rousseff to meet Brazil's primary budget goal could not only keep pressure on already-high inflation, but also hurt business confidence, which is considered one of the main reasons for Brazil's subpar economic growth over the past three years. ($1 = 2.2107 Brazilian Reais) (Reporting by Luciana Otoni; Writing by Silvio Cascione and Alonso Soto; Editing by James Dalgleish and Meredith Mazzilli)

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