UPDATE 2-Uruguay ups 2009 GDP growth view to 1.5-1.7 percent

NEW YORK, Sept 21 - Uruguayan President Tabare Vazquez said on Monday that the country has revised upward its 2009 economic growth projection to between 1.5 percent to 1.7 percent, noting his country had escaped recession.

The president told a university audience at The New School that the economy grew 0.5 per cent in the second quarter versus the first quarter. That followed a single quarter of negative growth in the preceding quarter.

"We didn't enter into a recession," he said. "And we corrected upwards the forecasts for this year's growth, which will be situated at 1.5 to 1.7 (percent) approximately."

"That is very modest, but it is not negative."

Uruguay's GDP grew last year by 8.9 percent, according to the economy ministry.

A South American country of 3.3 million, Uruguay cushioned itself from the impact of the world financial crisis by sound economic management, said Vazquez.

It more than tripled foreign reserves to $7 billion under his government, which took office in March of 2005, he said.

It also paid off its debt to the International Monetary Fund, allowing more economic policy autonomy, he added.

Vazquez's 2009 growth forecast was above the 1.2 percent gross domestic product growth outlook issued last week by the economy ministry.

He is constitutionally barred from running for re-election in the next presidential race to be held on Oct. 25.

The front-runners are Jose Mujica, a senator who was jailed during a military dictatorship, and Luis Lacalle, a center-right candidate who was president from 1990 to 1995.

Mujica, 74, represents the governing, left-leaning Frente Amplio party. He is is ahead in the polls, but he does not have enough of an advantage to avoid a second round.

BUDGET DEFICIT WIDENS

On government finances, Vazquez said the public sector was running a budget deficit of about 2.5 percent of GDP.

He blamed 1.5 percentage points of that deficit on a severe drought which cut hydroelectric output, forcing the country to import expensive oil to produce electricity.

Last year's public sector deficit was 1.4 percent, according to economy ministry data.

On Monday, Uruguay sold $500 million in global bonds due in 2025 to finance 2010 government operations, Economy Minister Alvaro Garcia said in the Uruguayan capital Montevideo.

Monday's sale was the first time in more than a year the country tapped international credit markets.

Uruguay sold almost $900 million in global bonds in July 2008, before the global financial crisis hit credit markets.

Last Sept. 16, Uruguayan Deputy Economy Minister Andres Masoller said the government had revised upward its 2009 growth forecast to 1.2 percent from 0.7 percent previously.

Over the last five years, it grew an average of 5.7 percent, rebounding from a severe recession in 2002 and 2003, triggered by a near-collapse in the economy of neighboring Argentina, which defaulted on about $100 billion in debt. (Additional reporting by Patricia Avila in Montevideo; editing by Carol Bishopric)