UPDATE 1-Peru to start cutting fiscal deficit this year as economy recovers

(Adds comments from finance minister on growth, tax revenues)

LIMA, Aug 2 (Reuters) - Peru will start reducing its fiscal deficit this year instead of next year as previously planned, the finance minister announced on Thursday, slashing the government's target for this year to 3 percent of GDP from 3.5 percent.

Finance Minister Carlos Oliva said robust growth and rising tax revenue have let the government get an early start on cutting the fiscal deficit, which expanded to a 17-year high of 3.1 percent of gross domestic product last year.

"This year we're thinking a 3 percent deficit," Oliva told a news conference with foreign media in Lima. "That means we're starting the path of reducing the deficit this year."

The announcement comes as Peru, the world's No.2 copper producer and one of Latin America's most stable economies, has been recovering from a sharp economic slowdown last year, when heavy floods and a graft scandal curtailed investments.

Tax revenue rose nearly 25 percent in June compared with a year ago, marking nine months of consecutive growth, while the economy expanded 4.83 percent in the first five months of the year, according to the latest available official data.

The government's new accelerated fiscal deficit reduction plan will be published in a report later this month.

Oliva said in addition to a 3 percent fiscal deficit target for 2018, it will also likely include a 2.7 percent target for next year, instead of 2.9 percent, and 1.9 percent for 2020 rather than 2.1 percent.

The government still plans to leave the fiscal deficit at 1 percent in 2021, when President Martin Vizcarra's term ends, Oliva added.

Moody's analyst Jaime Reusche called the new fiscal targets "positive news, outperforming consensus expectations."

"The fiscal accounts have hit a sweet spot where we are seeing a lower deficit thanks to record revenues, while still being able to provide support to the economy," Reusche said in an email.

Oliva said new measures aimed at reducing tax evasion should add about 1 percent of gross domestic product to government revenue in coming years.

But he added that his ministry was trimming its estimate for the increase in public investments this year by "a couple" percentage points from 17 percent.

Earlier on Thursday, Oliva told local broadcaster RPP that the government would likely propose a 5 percent increase to next year's budget.

(Reporting By Mitra Taj and Marco Aquino; editing by Diane Craft and Bill Berkrot)