UPDATE 1-Israel '08 economic growth to slow to 3.5 pct-IMF

(Adds details, comments from IMF, Bank of Israel)

JERUSALEM, Feb 14 (Reuters) - The International Monetary Fund forecast on Thursday that Israel's economic growth would slow to 3.5 percent this year from 5.4 percent in 2007, citing slacker demand from export partners.

The IMF had predicted growth of 4 percent in a preliminary report issued in December.

Led by strong exports and consumer demand, Israel's economy has grown at least 5 percent in each of the past four years.

"Slowing demand from Israel's export partner countries is projected to reduce output growth in 2008 to around 3-1/2 percent, with broadly balanced risks," the IMF said in its final report.

"Executive Directors welcomed the Israeli economy's exceptional performance, which reflects both sound policy implementation and strong global growth," it added.

Israel's Finance Ministry projects growth of 4.2 percent this year while the central bank sees a 3.6 to 4.4 percent pace, depending on the extent of a U.S. and global slowdown.

The IMF said economic growth was likely to remain strong even as external conditions were becoming less supportive.

While the report was largely upbeat on Israel's economy and praised both fiscal and monetary policies, the IMF reiterated that the country's public debt burden was still too high at about 80 percent of gross domestic product.