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UPDATE 1-Portugal budget gap slumps to near zero in 12 months to September

(Adds revenue, spending, PM's estimate, other details)

LISBON, Dec 22 (Reuters) - Portugal's budget deficit was just 0.1 percent of gross domestic product in the 12 months ended in September, down sharply from 1.3 percent three months, putting the country on course to beating its full-year target.

The National Statistics Institute said on Friday that in the first nine months of the year the deficit fell to just 0.3 percent of GDP from 2.8 percent in the same period of 2016, while in the third quarter alone, the country had a surplus of 2.6 percent as the economy headed for its best full-year expansion in a decade.

Portugal exited an international bailout programme in 2014 with many European officials holding the country up as a success story in reforming its economy.

The official full-year deficit target is 1.4 percent - which would make it a new record low in over four decades of the country's democratic history, but Prime Minister Antonio Costa said on Thursday the budget gap should narrow even more from last year's 2 percent and end the year below 1.3 percent.

The deficit estimate does not include any impact from the recapitalisation of state-owned bank Caixa Geral de Depositos by the state, worth around 4 billion euros, or 2.1 percent of GDP.

The government has said it expects Brussels to disregard the recapitalisation in this year's deficit and INE is involved in a dialogue with Eurostat regarding the impact of this complex operation on national accounts.

The INE said that in the 12 months to September, revenues rose 2.7 percent while spending edged 0.1 percent lower from June levels.

The Socialist government expects economic growth to accelerate to 2.6 percent this year after 1.5 percent in 2016. (Reporting by Andrei Khalip; Editing by Jeremy Gaunt)