The Philippines' budget deficit could widen to as much as P257 billion ($5.3 billion) this year if tax collections fall short of target and the state fails to sell assets, the economic planning chief said on Tuesday.

The government last month raised its 2009 fiscal gap target to P177.2 billion, or 2.2 percent of gross domestic product, from P102 billion previously to allow for higher state spending to boost the local economy amid the global downturn.

Socio-economic Planning Secretary Ralph Recto said the higher deficit is part of the assumptions made by the government.

"Assuming revenues will be flat, the deficit will hit P200 billion. If we don't have privatisation (proceeds), then it goes up to P230 billion," he told reporters.

If Philippine imports shrink by around 10 percent, which would mean lower customs duties, Recto said the budget gap could swell to P257 billion.

Finance Secretary Margarito Teves said earlier this month that the government was not keen on cutting spending to limit the deficit.

Teves said the government would try to secure more loans from multilateral development lenders, but if that plan doesn't work, it would tap more commercial borrowings locally and abroad.

But he also warned against incurring more debt because this "would affect our foreign exchange rate and interest rates, which in turn, would affect our macroeconomic conditions."

Since early this year, economic managers have been been hinting of a wider budget shortfall as tax collections, the main source of government's revenue, could be lower than expected given a slowing economy.

Initial figures from the customs bureau agency also showed it was short by about P3 billion, or 8 percent, on its combined targets for the first two months of the year, largely due to declining trade.

The government's projected deficit this year is significantly higher than the P68 billion, or 0.9 percent of GDP, in 2008. With Reuters