By Lawrence Agcaoili

The budget deficit could balloon to as much as P160 billion this year as the government is set to spend more for infrastructure and social services to cushion the impact of the global economic slowdown.

Economic Planning Secretary Ralph Recto said the government was likely to exceed the budget deficit forecast this year by as much as P58 billion to accommodate economic pump-priming.

?It can happen. I am not saying it should be P160 billion but it can happen,? he said.

The Cabinet-level Development Budget Coordination Committee has revised upwards its budget deficit target to P102 billion this year, or 1.2 percent of the gross domestic product, from the original target of P40 billion, or 0.5 of the GDP, due to the slackening economy.

?The probability that it will hit 2 percent of GDP is high. At 2 percent, that is roughly P160 billion, the market will understand as long as the economy grows faster than the debt,? Recto, who is also director-general of the National Economic and Development Authority, said.

He said this year?s ceiling of P102 billion would certainly be exceeded as the budget deficit was likely to hit P114.5 billion due to the P12.5-billion supplemental budget for the automated elections to be implemented by the Commission on Elections.

The Philippines abandoned its commitment to balance the budget last year and postponed fiscal consolidation back to the original 2010 schedule due to adverse external developments.

The Arroyo administration has implemented a series of fiscal reforms anchored on the Expanded Value Added Tax Act of 2005, which is aimed at putting the fiscal house in order. This helped trim the budget deficit to P12.4 billion in 2007 from a high of P210.7 billion in 2002.

Instead of a balanced budget, the country?s budget shortfall likely swelled to P75 billion, or 1.0 percent of the GDP last year.

The DBCC was forced to scale down the projected GDP growth this year to a range of 3.7 percent to 4.7 percent instead of 6.1 percent to 7.1 percent under the proposed 2009 budget due to the financial turmoil in the US.

The GDP growth slowed to 4.6 percent last year from a 31-year high of 7.2 percent in 2007 due to high oil and food prices in the first half as well as the global credit crunch in the second half.