UPDATE 5-Bush says committed to Middle East peace efforts

(Updates throughout with Bush, Abbas, Gheit comments)

By Matt Spetalnick and Tabassum Zakaria

SHARM EL-SHEIKH, Egypt, May 17 (Reuters) - U.S. President George W. Bush, responding to Arab dismay about his praise for Israel, said on Saturday he was confident a deal on Palestinian statehood could be reached before he leaves office.

Despite scepticism over his chances of securing a peace agreement by the end of his term in January, Bush expressed optimism that a deal could be done.

Speaking after a meeting with Palestinian President Mahmoud Abbas in the Red Sea resort of Sharm el-Sheikh, Bush said he told Abbas that he was "absolutely committed" to working with Palestinians and Israelis to get a Palestinian state defined.

"I do so for a couple of reasons. One, it breaks my heart to see the vast potential of the Palestinian people really wasted," he said.

"It'd be an opportunity to end the suffering that takes place in the Palestinian territories," Bush said. "And the second reason I'm for it is because it's the only way for lasting peace."

Palestinians say the Israeli occupation in the West Bank has created great hardship for them.

Abbas did not mention Bush's speech to Israel's parliament on Thursday in which he heaped praise on Israel but made only one reference to Palestinians' aspirations for a state of their own.