UPDATE 2-Argentina says 1st-qtr GDP grew, escapes recession

* Slowest quarterly GDP rise in six years

* Government revises down 2008 growth to 6.8 pct (Adds analyst, background on data doubts, details on sectors)

By Lucas Bergman

BUENOS AIRES, June 18 (Reuters) - Argentina's gross domestic product expanded 2.0 percent in the first quarter compared with the same period a year ago, the smallest growth rate since late 2002, the government said on Thursday.

The INDEC national statistics agency, which many private analysts accuse of overestimating growth, also said the first-quarter GDP marked 0.1 percent growth over the fourth quarter of 2008, narrowly avoiding a technical recession of two consecutive quarters of contraction.

INDEC said activity in the manufacturing sector fell 3.2 percent in the first quarter from the same period a year ago, while the service sector expanded by 4.7 percent.

Consumer activity, which represents about 65 percent of the country's gross domestic product, rose 1.5 percent year-on-year but investment sank 14.2 percent due mainly to falling investment in construction and capital goods.

Argentina's economy has grown by at least 6.8 percent in each of the last six years ARECI12, but the global recession and political uncertainties have hit factory output and consumer spending.

President Cristina Fernandez, who faces a key mid-term election on June 28, has said Latin America's No. 3 economy will continue to grow this year, refuting private forecasts for a contraction.

'UNCONVENTIONAL'

Many economic analysts say official data on growth and industrial production has been overly rosy in recent months, deepening a two-year controversy over the nation's inflation statistics.

"Even though we consider that it will be difficult for the authorities' unconventional and haphazard policies to prevent the economy from contracting in 2009, we would not be surprised if the official real GDP figures end up showing a positive number," Alberto Ramos, senior economist at Goldman Sachs, wrote in a report.

He forecast a contraction of about 1.0 percent this year.

Morgan Stanley said its estimates pointed to a 3.5 percent contraction in the first quarter.

"The sharp slump in official data on tax receipts also suggests that the downturn may be far sharper than what is reflected in official statistics," the bank said this week in a report.

Some analysts expect the Argentine economy to stabilize later this year and return to growth in 2010 as farm production recovers from this year's sharp drought and global grains prices rise.