MANILA - The Philippines' budget deficit hits P188 billion in the first 7 months of the year, bringing the government only P62 billion shy of its full year deficit target of P250 billion.

The Finance Department on Wednesday announced that the fiscal shortfall reached P34.6 billion in July, already half of the P62.5 billion budget deficit target for July to September period.

The government has thrice revised upward its budget deficit goal for this year due to a slowing economy. It now expects a record budget shortfall of P250 billion in 2009, or 3.2% of gross domestic product.

On Tuesday, Singapore-based investment bank DBS said it doubts if the Philippine government would be able to meet the revised ceiling this year and next. It said the fiscal position has been compromised by weak tax and customs collections, resulting in the wider fiscal gap.

The finance deparment previously banked on reforms in sin taxes--which even President Arroyo highlighted in her State of the Nation Address last July--but Congress has blocked it. Instead, the government is banking on proceeds from privatization of state assets to reduce the deficit.

The government has vowed to increase spending this year to support economic growth, which is projected to weaken to 0.8 to 1.8% after 3.8% expansion last year.

Last month, a $750 million in global bonds was sold , the last issue of its kind for the year, to help plug the higher budget deficit.

It still needs to raise about $250 million in additional financing, most of which it plans to source from the local market, on top of its 2009 programmed debt issues. - with Reuters