BUDAPEST, Feb 8 (Reuters) - Hungary's government will cut spending by 200 billion forints ($867.6 million) this year to avoid overshooting its 2.6 percent budget deficit target due to a poor economic outlook, the government spokesman said.
Hungary's economy is expected to slide into a recession of up to 3 percent this year due to a collapse in demand for its products in the euro zone. That will cut budget revenues, which the government now plans to offset via spending cuts.
"We can be positive that the government will stick to the 2.6 percent of GDP deficit target... and if there are further steps needed, it will be ready to act," government spokesman David Daroczi told a news conference on Sunday.
The economic decline will cut tax revenues and foreign investors are watching closely whether the government will let the deficit slip or stick to its pledge to the European Union to cut it below 3 percent in 2009.
Confidence has yet to fully return to Hungary's markets, which averted collapse only by way of a $25.1 billion IMF-led rescue loan in October.
The forint currency, which closed near 290 versus the euro on Friday, hit a record low at 304 per euro earlier in the week.
Daroczi said on Sunday the government decided to cut ministries' spending by 60 billion forints and will determine where to axe a further 140 billion next week.
It is also expected to announce details of a 1,000 billion forint tax reshuffle next week to stimulate the economy, which some analysts say could face a much deeper recession in 2009 after industrial output fell by 19.6 percent in December. ($1=230.50 Forints) (Reporting by Gergely Szakacs; Editing by Mike Nesbit)