MANILA - The Philippines' budget deficit is likely to stay above 3% of gross domestic product (GDP) next year due to the lack of heightened revenue efforts and continued pump-priming activities to stir the economy, New York-based Global Source said on Wednesday.

Citing the usual spending binge every election year, the think tank warned that the country could lose fiscal credibility should it fail to keep the deficit in check.

"With weak control over revenues, the temptation to keep on spending, and stalled fiscal reforms, we have our doubts the deficit will go down as targeted and will likely stay above 3% of GDP. To preserve fiscal credibility, it is surely in the country's best interest this early to mind the gap," said Global Source.

"Further pump-priming could lead to huge shortfalls and loss of belief in fiscal sustainability, setting back expansionary policy efforts both on the fiscal and monetary side as interest rates may start to climb," it added.

The government sees the budget deficit declining to P233.4 billion or 2.8% of GDP in 2010 from the projected P250 billion or 3.2% of GDP in 2009.

However, Global Source said the budget gap for this year will likely exceed the government's estimate.

"We still think the deficit will likely be closer to P270 billion or 3.5% of GDP but with risk of further slippage. Fiscal authorities may be unable to meet targets at this point unless it can pull off another round of privatizations as it had done so in the past," the think tank said.

Earlier, Finance Margarito Teves said the government is eyeing to sell key assets this year to keep its deficit target. These assets include a 40% stake in state energy firm Philippine Naitonal Oil Co., the 100-hectare Food Terminal Inc., and a property in Japan.