UPDATE 1-Bulgaria to meet fiscal gap target, IMF urges restraint

* IMF urges government to resist pressure for wage hikes

* Sees GDP growth accelerating to 1.5 pct in 2013

(Adds official quote, details)

SOFIA, Oct 2 (Reuters) - The International Monetary Fund praised Bulgaria's plans to keep its budget deficit at 1.3 percent of gross domestic product next year but urged the government to resist pressures to increase spending in an election year.

The head of the IMF Mission to Bulgaria, Catriona Purfield, told reporters on Tuesday the Balkan country was on track to meet its 2012 fiscal target as improving domestic demand and better use of European Union funds boost growth to 1.0 percent.

"It is very important to lock in the adjustments achieved so far and target a prudent fiscal policy. Within this prudent budget target, it is important to resist spending pressures," Purfield said upon completing a regular IMF visit to Bulgaria.

Fiscal policy is one of the few tools Sofia has at its disposal to protect the economy from external shocks. Its central bank is significantly limited in its monetary policy by the fact Bulgaria's lev currency is pegged to the euro.

The IMF expects Bulgaria's economic growth to accelerate to 1.5 percent in 2013 as its exports pick up in the second half due to improving demand in the euro zone, its main trading partner.

The finance ministry is to unveil the 2013 budget draft later this week. It has said the deficit target will be flat this year, although it plans to increase state pensions by an average of 9.3 percent as of April, betting on an improved economic outlook.

Purfield said the pension hike would not jeopardize the fiscal target but urged the cabinet to resist pressures for a general wage increase.

The cabinet, facing a re-election battle next summer, has been discussing increases in the wages of state teachers, while police and army officers have threatened protests if their pay remains frozen for a forth consecutive year.

The IMF urged the EU's poorest member to boost structural reforms in education and its labour market to cut unemployment, which it sees remaining in double digits next year.

The economic downturn has slashed 250,000 jobs in Bulgaria since 2009. The unemployment rate stood at 10.7 percent at the end of August.

The IMF did not mention Bulgaria's widespread corruption, which discourages investors, hinders growth and has delayed its entry into the EU's Schengen agreement, which allows passport-free travel between countries. An effort by the government to limit bribery lost momentum last year, data showed.

(Reporting by Tsvetelia Tsolova; Editing by Radu Marinas and Jane Baird)


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