MANILA - Worsening economic conditions could push the Philippines' budget deficit above the targeted ceiling, raising the likelihood of a credit rating downgrade, Dutch banking giant ING said Thursday.

"We think there will be further revisions to the deficit target and that the likelihood of a negative rating action has gone up," said ING analyst Tim Condon.

The market has been increasingly pessimistic about the country's ratings as the deficit continues to balloon and debt ratios deteriorate due to increased borrowings.

Foreign banks have made dire predictions about the country's deficit level this year, with Citibank projecting a budget shortfall of P400 billion due mainly to the Bureau of Internal Revenue's dwindling tax effort.

Citibank's projection greatly exceeds the government's revised deficit target of P250 billion or 3.2 percent of gross domestic product (GDP). The government's previous ceiling was P199.2 billion or 2.5 percent of GDP.

Given the increase in the deficit, the Philippines eyes to issue $500 million worth of Samurai bonds to help finance the government's spending program and plug the shortfall in revenue collection.

Earlier, credit watchdog Standard & Poor's warned of a possible downgrade in Philippine ratings if weakening revenues lead to higher fiscal deficit and spending cuts.

S&P has a ‘BB’ rating for the country’s long-term foreign currency-denominated obligations, ‘BB+’ for its peso-denominated long-term debts, ‘B’ for its short-term issuer default rating. The outlook for the ratings is stable.

S&P senior analyst Agost Benard said the country's weakness has been the same in the past years: it has a high public sector debt stemming from a narrow tax base and inefficient public enterprises.

The ratings firm has revised its growth forecast for the Philippines to 1.3 percent from 1.7 percent previously following the country's dismal 0.4 percent growth in the first quarter.