Czech FinMin sees lower 2006 public sector gap

PRAGUE, Oct 11 (Reuters) - The Czech Finance Ministry said on Wednesday it was lowering its prediction for the 2006 public finance deficit to 3.5 percent of gross domestic product (GDP) from a previous forecast of 3.8-3.9 percent of GDP.

The updated outlook is better that the euro convergence programme target of 3.8 percent agreed with Brussels and mapping out the country's road to fulfilling the criteria for euro adoption.

But the ministry has also signalled the deficit is likely to shoot up to about 4 percent of GDP in 2007, mainly because of an increase in social handouts approved before a June election.

The public finance -- or general government -- deficit includes the state budget as well as local budgets, health insurance sector and off-budget funds. ((Reporting by Marek Petrus; Editing by Alan Crosby; Reuters Messaging: rm://marek.petrus.reuters.com@reuters.net; e-mail: prague.newsroom@reuters.com or marek.petrus@reuters.com; Tel: +420 224 190 477))

Keywords: ECONOMY CZECH DEFICIT