Chile's president says reform drive to be curtailed as revenue shrinks

SANTIAGO, July 10 (Reuters) - Chile's President Michelle Bachelet on Friday scaled back expectations for her ambitious reform drive, saying her government will have to prioritize some policy decisions as an economic slowdown has eaten into fiscal resources.

Bachelet came into office for a second non-consecutive term in March 2014 promising a raft of social reforms, such as comprehensive changes to the education system, overhauling the tax system and upending the nation's constitution, which was put in place during Chile's 1973-1990 dictatorship.

"We know that we're not going to have all the resources initially forecast to move forward with our program and to process new social demands," said Bachelet, adding her government would prioritize certain reforms and "gradually" move forward on them.

A softer-than-expected economic recovery, which prompted the government on Monday to cut its forecast for 2015 economic growth to 2.5 percent from 3.6 percent, is squeezing government revenue.

Despite staunch opposition, Congress has put into law Bachelet's tax changes, the first leg of the education reform, modifications to the electoral system, and civil unions for same-sex couples.

Bachelet's approval rating fell to a record low in June after a month of political shakeups and protests, dropping to 27 percent, according to pollster GfK Adimark.

That could make pushing through a labor reform bill, additional changes to education, and an easing of abortion laws even more of an uphill battle.

"Prioritizing the program is not just about resources; it's also about management. The government's capabilities are limited in this regard, as are the capabilities of the political system to process reforms," said Bachelet.

(Reporting by Felipe Iturrieta; Writing Anthony Esposito; Editing by Lisa Shumaker)