MANILA - Singapore-based investment bank DBS doubts if the Philippine government would be able to meet its deficit target this year and in 2010.

It cited a major culprit: weak revenue collections.

“Unless revenue collection speeds up, or the government holds back on expenditure—despite the economic environment requiring expansionary fiscal policy—we continue to take the view that for the year, the overall budget deficit remains at risk of exceeding official forecasts,” DBS said in its daily note.

Economic managers have revised the budget deficit this year to P250 billion or 3.2% of gross domestic product (GDP), based on a revised growth projections of between 0.8% and 1.8%.

But DBS is expecting a wider budget gap: between P280 billion or 3.7% of GDP and P340 billion or 4.5%. “Given our expectation for weak real GDP growth of 0.5% this year, revenue collection will continue to be a struggle, and the budget shortfall may well come to between P280 billion and P340 billion,” it added.

In the first six months of the year, the country’s budget deficit leapfrogged to P153.4 billion from P18 billion in the same period last year due to accelerated spending. The government has tried to cushion the local economy with a P330 billion stimulus package, which has yet to show significant results.

2010 targets

The spill over of a possible wider deficit this year, according to DBS, makes “Next year’s budget figures seem somewhat challenging.”

The Cabinet-level Development Budget Coordination Committee last week approved a higher budget deficit ceiling ofP233.4 billion or 2.8% of GDP instead of the earlier target of P208.4 billion for next year.

DBS said this would likely result in additional foreign debts for the Philippines.

“That’s at the high end of earlier guidance of 2.5% to 2.8% and will result in the government upping its foreign debt issuance from the initial $1.5 billion,” DBS said.

Recently, National Treasurer Roberto Tan said the government has no more plans to tap the foreign capital market to plug the deficit next year.

In the State of the Nation Address of President Arroyo in July, she highlighted how her administration “exorcised” foreign debts.