UPDATE 1-Kazakhstan cuts 2008 GDP growth forecast to 5 pct

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ASTANA Oct 21 (Reuters) - Kazakhstan cut its 2008 economic growth forecast on Tuesday to 5.0 percent from an earlier estimate of 5.3 percent, as Central Asia's biggest economy continued to falter under the weight of a global credit crisis.

Kazakhstan, also the region's top oil producer, has suffered badly from the global liquidity squeeze after years of double-digit expansion fuelled by aggressive foreign borrowing by local banks and natural resource companies.

Reflecting these worries, Economy Minister Bakhyt Sultanov said the government had cut its 2008 outlook further.

"The GDP outlook has been lowered by 0.3 percentage points," he told a government meeting.

By comparison, the International Monetary Fund sees 2008 economic growth at 4.5 percent in Kazakhstan -- which market players have identified as one of the highest-risk emerging market nations in terms of banking sector strength.

The price of insuring Kazakh debt against default has continued to rise with credit default swaps (CDS) for some banks quoted between 3,000 and 5,000 basis points last week. Any CDS price above 1,000 is usually seen as pricing in default.

On Monday, rating agency Moody's announced its outlook for the Kazakh banking system was negative due to problems with asset quality and funding as well as falling commodity prices.

To combat these problems, the government plans to inject $15 billion into Kazakhstan's $100 billion economy this year to ease the pressure on the ailing banking and construction sector.

So far, however, banks have been able to refinance most of $12 billion in debt scheduled for this year without trouble. (Reporting by Raushan Nurshayeva; Writing by Maria Golovnina; Editing by Ben Tan)