UPDATE 1-Guatemala's inflation hits 9.4 pct in 2008

(Adds background on economic growth)

GUATEMALA CITY, Jan 7 (Reuters) - Inflation in Guatemala was 9.4 percent in 2008, the highest in 12 years, the government said on Wednesday, as falling prices for gasoline and other commodities in recent months failed to offset earlier, steep rises.

Guatemala's annual inflation in 2007 was 8.75 percent.

"In one year we've had two scenarios: one of significant price rises in products like gasoline, diesel and grains, and in the last two months of the year, there have been price cuts of up to 30 percent in the same products," said Luis Arroyo, from the National Institute of Statistics.

Guatemala's economy will likely grow between 3 percent and 3.5 percent in 2009, compared to 4 percent in 2008, as the financial crisis hits the textile and construction sectors and remittances from migrants fall, according to the country's central bank.

The manufacturing sector, which includes textile factories that export to the United States, fell 2.4 percent in 2008 and is expected to dip 1.9 percent this year.

The government said its target for inflation in 2009 is 5.5 percent. (Reporting by Sarah Grainger; Editing by Leslie Adler)