(Corrects to show May price fall does not mark first negative inflation in 57 years)
* Spain May flash CPI -0.8 pct yr/yr vs -0.7 pct forecast
* Spain sees inflation by year end, rules out deflation
* Some analysts see risks of negative core inflation in 2010
By Andrew Hay
MADRID, May 28 (Reuters) - Spanish consumer prices fell more than expected in May on lower energy prices, deepening Spain's first negative inflation in 57 years, but the government saw positive prices by year-end.
Spain's European Union harmonised CPI fell 0.8 percent year-on-year in May compared with a 0.2 percent decline in April and a Reuters forecast for a 0.7 percent fall, according to preliminary data from the National Statistics Institute on Thursday.
The data preceded euro zone inflation on May 29 expected to show consumer price inflation in the 16-member bloc eased to a new record low 0.2 percent in May from 0.6 percent during April, according to a Reuters forecast.
Societe Generale analyst Olivier Gasnier cut his outlook for wider euro zone prices to 0.1 percent on Wednesday after lower-than expected German price data and said the Spanish number did not change his outlook for the area.
"From here on prices will get really negative for Spain, I think we can go as low as -1.5 percent for July, then we have the sharp increase in inflation from August," said Gasnier.
Spain is suffering its first negative inflation since 1952 and the Bank of Spain hopes the disinflation process will boost competitiveness of exports, long hampered by one of the highest inflation rates in the euro zone.
Spain will be the last member of the European Union to exit recession, probably in 2011, the European Commission forecasts.
Spanish flash inflation followed data on Wednesday that showed German consumer prices were unchanged compared with the previous year for the first time since reunification in 1990.
Asked if there was danger of deflation in Spain, Spanish Economy Minister Elena Salgado told radio station Cadena Ser: "Absolutely not, because this is solely and fundamentally due to the fall in oil prices."
But some economists saw chances Spanish core inflation, which cuts out volatile oil and fresh food components, would turn negative in 2010 due to a prolonged recession in the euro zone's fourth largest economy.
"We are seeing the impact from energy and food and especially in Spain we are seeing evidence of a downward trend in core inflation. We believe this will continue -- it's a result of the adjustment Spain is undergoing in terms of growth. We believe Spanish core inflation will be negative in 2010," said Luigi Speranza at BNP Paribas.
Spain publishes final, full May price data, including core inflation, on June 10. (Additional reporting by Sonya Dowsett and Jason Webb) (Reporting by Andrew Hay; Editing by Sonya Dowsett)