RIGA, Nov 12 (Reuters) - Latvia's economic output will fall less than expected this year and the outlook for next year is still for growth above 3 percent, the Baltic state's prime minister said on Friday. The government has been revising its forecasts as it works out how to meet public sector deficit reduction targets for 2011 set as part of an international funding agreement and to get on course for eventual euro entry. The contraction forecast for 2010 was now 0.4 percent rather than 1 percent "and ... this is a very cautious outlook," Valdis Dombrovskis told reporters. The government stuck to a forecast for 2011 growth of 3.3 percent and saw consumer price inflation of 1.1 percent. He said the government hoped to agree soon on the measures needed to cut the deficit to 6 percent of gross domestic product in 2011 from an expected 8.5 percent of GDP this year. The government has so far been working on an estimate for cuts of about 400 million lats ($769 million), though this might be revised. Latvia had the worst recession in the European Union in 2009 with an 18 percent contraction. It showed its first quarterly expansion for more than two years in January-March on a year-on-year basis. It has pledged to cut its budget deficit to 3 percent of GDP by 2012 under the IMF-led 7.5 billion euro bailout the country was forced to take in 2008. (Reporting by Aija Braslina; Editing by John Stonestreet) ($1=.5200 Latvian Lat) Keywords: LATVIA ECONOMY/ (Riga newsroom, firstname.lastname@example.org, +371 26 596 553) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved.
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