Obama likely to announce re-election bid next week, Posted by Meosha Eaton

* Obama ahead of rivals in polls

* Declaration would allow him to start raising money (Updates with poll figures, Labor Department report)

By Jeff Mason

WASHINGTON, April 2 (Reuters) - President Barack Obama is likely to announce plans next week to run for re-election and file campaign papers with the Federal Election Commission as early as Monday, a Democratic official said on Saturday.

Filing with the FEC would allow Obama, a Democrat, to start raising money for the 2012 campaign that is expected to shatter records in political spending.

The official said no final decision has been made about the timing of an announcement or filing.

Obama is in the middle of a budget battle with congressional Republicans and has focused his message in recent weeks on reducing U.S. dependence on foreign oil and investing in innovation and education -- themes he likely will highlight in his bid to hold on to the White House next year.

At the same time, Obama has been defending U.S. involvement in military operations in Libya.

Republicans are pressing Democrats to make deep spending cuts to shrink the U.S. deficit, another issue that could play a crucial role in the campaign.

The Republican field of presidential challengers is still wide open, however, and no one has formally announced a bid.

Obama is expected to avoid overt campaigning while his potential Republican opponents compete against each other.

But he has started doing some fundraising events for his party in recent weeks. Formally announcing his candidacy would allow Obama to start filling his own campaign's coffers directly, too.

The president got a boost on Friday with a Labor Department report showing a slight decline in the U.S. unemployment rate to 8.8 percent. An improving economy is seen as critical to his re-election hopes.

Opinion surveys show U.S. voters are split over Obama. A Real Clear Politics average of several polls showed 47.4 percent of Americans approving of his performance in office and 46.6 percent disapproving.

Poll averages also show Obama beating potential Republican rivals including former Massachusetts Governor Mitt Romney, former Alaska Governor Sarah Palin and former Speaker of the House of Representatives Newt Gingrich. (Reporting by Jeff Mason; Editing by Xavier Briand)