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SOFIA, April 30 (Reuters) - Bulgaria's central bank has revised its forecast for 2009 growth to between 0.6 and -2.0 percent from a previous 2 percent increase to reflect the global economic slowdown, the central bank said on Thursday.
The bank said it has cut its forecast due to the slowing economic activity and dampening domestic demand.
"The lower forecast for external demand and the insecurity for the future as well as the lower exports and lower domestic demand have lead to the revision of the GDP forecast," the central bank said in a report.
Earlier this month, the IMF, which sees Bulgarian economy shrinking by 3.5 percent this year, urged the Socialist-led government to cut spending to avoid sleeping into deficit in 2009 for the first time in seven years.
Prime Minister Sergei Stanishev has said he will not allow any loosening. Bulgaria operates under a currency board regime which pegs the lev to the euro and limits monetary policy, leaving fiscal policy as the main tool to steer the economy.
Earlier on Thursday Fitch Ratings revised Bulgaria's credit outlook to negative from stable and forecast that the Balkan country's economy will contract by 5.5 percent in 2009. [nN30527907]
The central bank also said it expected the current account deficit - Bulgaria's key economic concern, to fall to between 17.2 and 13.8 percent of GDP this year.
The Balkan country ended 2008 with an external shortfall of over 25 percent of GDP.
Analysts say the gap will be a serious risk to the EU newcomer's economy due to plummeting foreign investment flows.
Some have already warned that the deficit makes Bulgaria vulnerable to external shocks and the drop of foreign cash may put a strain on the country's currency board regime -- seen as a cornerstone of Bulgaria's fiscal and monetary stability. (Reporting by Irina Ivanova)