* Finance minister cuts GDP forecast to between zero and -0.5 pct

* Energy sector hit hard by flooding in May

* Minister sees budget revision in August to mid-September

(Adds quotes, background, advisory body)

By Ivana Sekularac

BELGRADE, June 24 (Reuters) - Serbia cut its forecast for economic growth in 2014 on Tuesday, saying GDP may shrink as much as 0.5 percent because of the damage inflicted by devastating floods in May.

More than 65 people were killed by flooding in Serbia, Bosnia and Croatia last month. The heaviest rainfall in living memory caused rivers to burst their banks and sweep away roads, bridges and homes.

The damage in Bosnia and Serbia is estimated to be around 2 billion euros ($2.7 billion) each. The energy sector in Serbia was particularly hard hit, including one major coal mine that remains submerged.

The government's 2014 budget foresees growth of 1 percent, following a 2.5 percent expansion last year. But Finance Minister Lazar Krstic told a economic conference that "our initial estimate is that this year's GDP (gross domestic product) will be between zero and minus 0.5 percent.

"The power sector suffered the greatest damage during the recent floods," he said. "That will have a direct effect on GDP."

SAVINGS

Krstic said the budget would be revised after a full damage assessment, with an international donors' conference for Serbia and Bosnia planned for July. "We think we'll complete that in August or mid-September," he said.

Krstic warned that Serbia needs to save up 1.5 billion euros over the next three years. The European Union candidate country is under pressure to curb a fiscal deficit that is expected to breach a government forecast of 7 percent of GDP and to cap public debt, which now stands at 63 percent of output.

An economist at Serbia's Fiscal Council, an economic advisory body to the government, said the deficit may reach 8.7 percent of GDP, and without stringent savings, public debt may hit 80 percent of GDP, far higher than the International Monetary Fund recommends for similar emerging economies.

"Serbia is in a pre-bancruptcy state," the economist, Vladimir Vuckovic, told Serbian Radio B92.

The IMF has postponed talks on a potential loan deal with Serbia for the autumn. The World Bank has made it a condition of a $250 million loan for budget support that laws on labour, privatisation and bankruptcy laws and new rules on construction permits be adopted.

Structural reforms have been promised by a governing coalition. Further delay will test investor confidence.

An international donors' conference is planned in July to find some of the money that Serbia and Bosnia, as the worst-hit, need to fund the recovery.

($1 = 0.7357 euros)

(Reporting by Ivana Sekularac; Writing by Matt Robinson; Editing by Larry King)

((matt.robinson@thomsonreuters.com)(+381 11 304 4903)(Reuters Messaging: matt.robinson.thomsonreuters.com@reuters.net))

Keywords: SERBIA GDP/