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PRAGUE, Jan 30 (Reuters) - The Czech economy will slow deeply in 2009 but eke out 1.4 percent growth, the Finance Ministry said on Friday in an outlook that seemed rosier than most analysts' expectations. The ministry said in a quarterly forecast that growth would slow to 1.4 percent in 2009 -- a figure flagged by Finance Minister Miroslav Kalousek last week -- down from an earlier 3.7 percent estimate and 4 percent expected for the last year.
Czech manufacturing has suffered along with central Europe's other export-reliant economies due to collapsing demand from a recession-hit euro zone, and many analysts have now forecast either near-zero growth for 2009 or even a contraction.
Under the reduced outlook, the public sector gap would jump to 3 percent of gross domestic product this year, from the previously predicted 1.6 percent amid the financial crisis.
The deficit would dip to 2.9 percent of GDP in 2010, when the economy is expected to inch up 2.1 percent.
Kalousek said last week a planned 38.1 billion crown ($1.75 billion) central budget deficit would likely be almost double and the overall public sector gap would be 3 percent of GDP if the economy grew by about 1 percent.
"The risks of the forecast are tilted to the downside," the ministry said in a statement. "(Growth) should be driven mainly by household spending over the entire forecast horizon."
The European Commission forecast last week the central European country would grow by 1.7 percent this year, but most other agencies and analysts have been less optimistic.
"Even after a perceivable reduction of its earlier optimism, the ministry's forecast remains greatly away from consensus on the market," said Pavel Sobisek, chief economist with UniCredit Bank in Prague.
"The deviation in the forecasts for this year is noticeable in most parameters, so the outlook of the ministry looks internally consistent but like something from a different country or different time."
UniCredit expects the Czech economy to slip 1.2 percent this year before picking up by 2.6 percent in 2010.
Data earlier this month showing a record drop in November industrial output and exports signalled worse data was likely on the way.
Some analysts say the economy entered a quarter-on-quarter decline in the final three months of 2008, a trend likely to continue in the first quarter.
The European Bank for Reconstruction and Development predicted last week zero growth for 2009, and Fitch rating agency's director for emerging Europe said the Czech economy will contract by 1.5 percent this year.
Hungary is set for recession in 2009, while central Europe's largest economy, Poland, is seen maintaining some growth.
The Czech Republic had been largely unhurt until now by the global financial sector crisis that started bubbling in 2007.
Previous annual growth of around 6 percent between 2005 and 2007 had aided double-digit profit growth at banks, which kept to plain-vanilla lending, while growing revenues for the state helped slash government budget deficits.
Last year, the overall public sector deficit reached 1.2 percent of GDP, according to preliminary data.
The ministry forecast a current account gap of just 1.8 percent of gross domestic product this year, down from 2.3 percent expected in a previous prediction, showing the country should maintain a relatively strong external position. (Reporting by Jan Lopatka and Jason Hovet; editing by Stephen Nisbet)