(Corrects to show GDP growth is year-on-year, fixes dropped word in paragraph 2)

TUNIS, Aug 19 (Reuters) - Tunisia's economic growth slowed sharply in the second quarter to 0.7 percent year-on-year, official data showed on Wednesday, after two Islamist militant attacks on a museum and a beach hotel crippled its tourism industry.

The economy had expanded 1.7 percent in the previous quarter compared to the same period a year earlier.

Tunisia's tourism industry, which makes up about 7 percent of the economy, slowed in June after a gunman killed 38 mostly British tourists in the seaside city of Sousse. In March, two gunmen killed 21 foreign tourists and a policeman at Tunis's Bardo Museum.

Both attacks were claimed by the Islamic State jihadist group and prompted several countries to ban travel to Tunisia.

Strikes and protests have also disrupted the country's vital phosphate exports.

Tunisia has already cut its GDP growth forecast to 0.5 percent this year, down from an initially expected 3 percent. In 2014, Tunisia posted GDP growth of 2.3 percent.

Tunisia turned its attention to reviving its economy after it completed a transition from the dictatorship of Zine El-Abidine Ben Ali, who was ousted in a 2011 uprising, to a democracy with free elections and a new constitution.

The government expects the budget deficit to narrow to 5 percent of gross domestic product in 2015 from 5.8 percent last year.

But Tunisia is also under pressure from international lenders to reduce public spending, including subsidies on basic foods and fuel, and to cut the deficit further to help economic growth even as social tensions make cost-cutting sensitive.

(Reporting By Tarek Amara; Editing by Patrick Markey and Raissa Kasolowsky) ((tarek.amara@thomsonreuters.com;))