JAKARTA, Aug 15 (Reuters) - A two-year-old Indonesian girl in Bali suspected of having bird flu after a neighbour died of the disease has tested negative for the H5N1 virus, a health ministry official said on Wednesday.

The girl was recovering in a hospital in Bali's capital Denpasar and would soon be released, Suharda Ningrum of the health ministry's bird flu centre told Reuters by telephone.

A neighbour of the girl from the same village in west Bali became the first confirmed human death from the H5N1 bird flu virus on the resort island hugely popular with foreign tourists.

The woman, 29, died on Sunday.

Her 5-year-old daughter also died recently after playing with chickens but it was unclear if the girl died of bird flu because no tissue samples were collected from the girl's remains.

Officials said there had been sick chickens in the village and many fowl had died in recent weeks.

Bayu Krisnamurthi, head of the national bird flu commission, said on Monday measures to contain the outbreak had been put in place, including culling and testing of humans and animals in the area.

Bird flu is endemic in bird populations in most parts of Indonesia and experts said the virus has been endemic in Bali's poultry population since 2003.

In Bali, as in the rest of the country, millions of backyard chickens live in close proximity to people.

Experts fear if the virus develops the ability to pass easily between humans, millions might die in a pandemic.

Indonesia has had 82 confirmed human deaths from bird flu, the highest of any country in the world.

There have been 320 confirmed human cases and 193 deaths globally, according to World Health Organisation data.

Bali, a predominantly Hindu island in mostly Muslim Indonesia, is the centre of Indonesia's tourism industry and the woman's death could deal a blow for the island, which is recovering from several deadly bomb attacks by Islamic militants.

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