* Budget deficit set to nearly double next year
* Privatisation drive key to repairing public finances
* Rating agencies not perturbed, debt markets down
(Writes through with Rostowski news conference)
By Kuba Jaworowski and Pawel Sobczak
WARSAW, Sept 7 (Reuters) - Poland's budget deficit remains under control despite a near-doubling in its size next year, Finance Minister Jacek Rostowski said on Monday, after local bond yields jumped on anxiety over the state of public finances.
Rostowski said over the weekend that the 2010 deficit would jump to 52.2 billion zlotys from this year's target of 27.2 billion, due to a sharply slowing economy and tumbling revenues.
The news, which drove bond yields 5-7 points higher across the curve on Monday but failed to rattle the zloty, signals that the EU's biggest ex-communist economy may see more fallout from a financial crisis it has largely ridden out smoothly.
However, ratings agencies said the increased deficit did not alter their outlook for Poland and analysts said the overall public debt level would largely depend on the government's success in meeting its minimum target of 28 billion zlotys in privatisation revenues in 2009-10.
"I would like to underline that the deficit planned for next year is safe," Rostowski told a news conference on Monday.
"According to our expectations, the situation in the public finances should start improving in mid-2010, also on the labour market," he added.
Rostowski also said the general government deficit, a wider measure that includes municipalities and various state agencies, would not exceed 7 percent of gross domestic product in 2010.
This is substantially less than the slippage seen in many developed economies -- but it is more than twice the European Union's deficit ceiling and Poland has to pay almost twice what neighbouring Germany does to borrow on financial markets.
Rostowski played down concerns the deficit might push Poland's overall public debt beyond containment levels that would spark painful automatic fiscal adjustments. The government is resolved to keep debt below 55 percent of GDP, he said.
Analysts noted that the government's 2010 budget assumption of 1.2 percent growth was conservative but also warned that its hopes of reining in debt growth through increased privatisation revenues might prove unrealistically optimistic.
TIGHTENING NOOSE
"The situation in 2010 looks dangerous. The government has bet everything on one card, that they will be able to take their head out of the noose before the rope tightens," said Michal Dybula, economist at BNP Paribas in Warsaw. "They expect the economy will recover sharply and that they'll be able to fulfil their privatisation plan."
Bank Zachodni WBK analysts echoed this concern.
"In the near term the government should do everything to make the privatisation plan credible as history shows privatisation plans were usually not realised," they said in a note to clients.
Trapped by its need to prop up public finances, Poland may need to accept lower prices for state assets, analysts said.
So far this year the government has raised a third of the 12 billion zlotys in revenue seen in its 2009 privatisation plan.
Deputy Finance Minister Dominik Radziwill told Monday's news conference Poland's borrowing needs in 2010 would total 203.8 billion zlotys but that he saw no risks to selling Polish debt. Poland will increase financing on foreign markets, he added.
The zloty fell about 0.3 percent against the euro by 1300 GMT while other currencies in the region gained. Warsaw's WIG20 blue chip index rose 2.6 percent <.WIG20>, buoyed by a generally better tone on stock markets worldwide.
There were other positive signs.
A government source said this year's central government budget gap should come in at about 23 billion zlotys, below the budgeted 27 billion.
Ratings agencies Standard & Poor's and Moody's said that Poland's 2010 deficit plan was not negative for the country's rating prospects and that the rise was temporary.
"The planned budget deficit figures for 2010 are very much in line with what we expected when we confirmed the rating of Poland a month ago," S&P analyst Kai Stukenbrock told Reuters. "The planned 2010 deficit is not a negative surprise for the rating's perspective."
Given that deficits in most of the 27 European Union member states are seen topping the bloc's 3 percent ceiling, analysts say markets' punishment of Poland is unlikely to be too severe and investors will continue to buy its debt.
But its deficit woes have scuppered Poland's hopes of joining the euro in 2012. A member of the central bank's Monetary Policy Council said on Monday 2013 was now the earliest possible entry date. (Additional reporting by Karolina Slowikowska and Gabriela Baczynska, writing by Gareth Jones, editing by Patrick Graham)