INTERVIEW-UPDATE 2-Sri Lanka's inflation may fall under 10 pct

(Recast, adds bylines, details, quotes)

By Shihar Aneez and C. Bryson Hull

COLOMBO, Aug 28 (Reuters) - Sri Lanka's economic growth is expected to be less than a forecast 7 percent this year due to tight monetary conditions but inflation may fall into single digits by the end of 2009, the central bank governor said.

All-time high fuel and food prices pushed inflation in Sri Lanka this year -- among the highest in Asia -- to a record level when measured on an index introduced in December that tracks it back to 2002. Under the old index, it would be an 18-year high.

"If there are no major shocks, we would see a single digit inflation by end of next year," Central Bank Governor Ajith Nivard Cabraal told Reuters in an interview on Thursday.

But he warned that tight monetary policy would mean growth in 2008 would be slightly less than the forecast 7 percent.

"It would be lower than 7 percent. But nevertheless it wouldn't have been much more. If we can manage the growth between 6-7 percent and also if we can bring down the inflation, then we can withstand a very tough trend."

Sri Lanka's economy expanded 6.8 percent in 2007.

Cabraal said targeting reserve money numbers on a daily basis should prompt inflation to ease "faster than any other country (in South Asia) if you see the numbers in the next 6-12 months".