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UPDATE 1-Chile 2018 fiscal deficit may be narrower than forecast -finmin

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(Adds quotes, context on deficit)

By Antonio De la Jara and Dave Sherwood

SANTIAGO, Oct 12 (Reuters) - Chile's Finance Minister Nicolas Eyzaguirre told Reuters on Thursday economic growth and higher copper prices could lead to a narrower 2018 fiscal deficit than the 1.9 percent of gross domestic product (GDP) forecast in the government's budget bill.

"I do not rule it out, from what we have seen in the forecasts for growth next year," Eyzaguirre said in a phone interview from Washington. "The price of copper has proved resilient."

The world's top copper producer has long been one of Latin America's most fiscally sound countries. But several years of declining copper-related revenue and higher spending on education and other social programs under outgoing President Michelle Bachelet widened the fiscal deficit and contributed to recent downgrades by credit rating agencies Fitch and S&P.

This year the South American country is expected to post a fiscal gap of 2.7 percent of GDP, below the government's initial target of 3.1 percent of GDP.

Eyzaguirre, appointed in late August after his predecessor resigned, said a 7.5 percent rise in government revenues next year would help drive the reduction in the deficit.

Chile, Latin America's wealthiest country, is the region's highest-rated sovereign debt holder, with a long record of stability, sound fiscal management, and rainy-day buffers in the form of sovereign wealth funds.

"It's clear from the trajectory, as we've seen in the past, that we're headed in a positive direction and that in a few years we could completely close the deficit and stop increasing our debt," he said.

Eyzaguirre also said a surprise fall in inflation in September demonstrated there is more space for economic growth than in the past. (Additional reporting by Felipe Iturrieta; Editing by James Dalgleish)

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