UPDATE 2-Danish economy's weak fourth quarter puts this year's forecast in doubt

doubt@

* Q4 GDP contracts 0.9 pct q/q, 1.0 pct yr/yr

* Contraction bigger than economists' expectations

* Q3 growth revised up to 0.8 pct growth

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COPENHAGEN, Feb 28 (Reuters) - Denmark's economy shrank more than expected late last year, putting government forecasts for growth this year in doubt even after tax cuts and other stimulus measures announced this week.

Euro zone outsider Denmark has struggled to stay out of recession in the past year after a burst property bubble hurt confidence and private consumption and put the banking sector under pressure.

Sluggish exports, traditionally a driver of the Danish economy - one of few European countries to retain a triple-A credit rating - have also hampered economic recovery as demand in the euro zone stayed weak.

Danish gross domestic product fell 0.9 percent in the fourth quarter from the previous three months, data from Statistics Denmark showed on Thursday, lagging forecasts for a 0.3 percent decline.

Economists expect some improvement this quarter, enabling Denmark to avoid another recession, defined as two consecutive quarters of falling GDP.

However, Finance minister Bjarne Corydon acknowledged that Thursday's data, which showed that the economy shrank 0.6 percent last year after 1.1 percent growth in 2011, was challenging.

"The fourth-quarter figures very clearly show that 2012 was not a good year for the Danish economy and that the crisis has not loosened its grip on Denmark," Corydon said in an emailed response to Reuters.

The centre-left government announced a package of measures on Tuesday to try and revive growth, including cutting the corporate tax rate to 22 percent, but economists said the government's forecast for 1.2 percent growth this year still looked too optimistic.

The central bank is even more upbeat, projecting 1.6 percent growth.

"The government's new growth package is unlikely to really change the picture," said Sydbank chief economist Jacob Graven.

"The 1.2 percent economic growth expected by the government seems very optimistic based on today's numbers," he said, adding he expected growth of around 0.5 percent in 2013.

The government's growth plan also included additional tax credits for research and development, deductions on property tax and increased export guarantees.

The cut in corporate tax, from 25 percent, will be gradual from next year and follows on the heels of Sweden, which cut its corporate tax rate to 22 percent from 26.3 percent this year.

EXPORTS FALTER

Danish growth in the third quarter of 2012 was revised up on Thursday to 0.8 percent on a quarterly basis from a previous estimate of 0.3 percent, but the economy fell back in the final quarter of the year as exports were hit.

"Exports are suffering from the crisis in Europe and private consumption is suffering because households keep saving," said Jyske Bank economist Niels Ronholt.

Denmark has fared worse than its Nordic neighbours Sweden and Norway since the global financial crisis.

Norway's economy grew 0.3 percent in the fourth quarter of 2012 from the previous quarter while Sweden is scheduled to publish its GDP for the quarter on Friday, with economists forecasting a 0.7 percent contraction.

Germany is Denmark's biggest export market and its economy shrank 0.6 percent in the final quarter of 2012.

Trade with other EU countries accounts for roughly 70 percent of Denmark's exports, which in total dropped by 1.6 percent in the fourth quarter while private consumption declined by 0.1 percent. Danish retail sales have fallen each consecutive quarter since March last year.

Danish GDP contracted 1.0 percent in the fourth quarter from a year earlier, Statistics Denmark said.

(Editing by Susan Fenton)