By Lawrence Agcaoili

The Philippines expects to register another deficit in 2010, formally dropping its plan to balance the budget next year due to the global economic crisis.

Finance Undersecretary Gil Beltran told members of a Congressional oversight committee yesterday that the Philippines would likely incur a budget shortfall of P132.1 billion, or 1.5 percent of gross domestic product in 2010, saying the impact of the global economic meltdown would still be felt until next year.

?The crisis will still be there in 2010. There won?t be an immediate disappearance of the crisis, there will still be effects,? he said.

He said the budget deficit ceiling approved by the Development Budget Coordination Committee for next year was slightly better than the revised cap of P177.2 billion, or 2.2 percent of GDP this year.

Beltran said the Philippines would be able to balance its budget either in 2011 or 2012, depending on the fiscal plan to be implemented by the next administration.

The government?s economic managers earlier agreed to raise this year?s budget deficit ceiling to P177.2 billion from the revised P102 billion, or 1.2 percent of GDP, due to the full impact of the global financial crisis on the domestic economy.

Beltran said economic managers expect the GDP to expand between 4.9 percent and 5.8 percent next year from the revised growth target of 3.7 percent to 4.4 percent this year.

The government earlier implemented a series of fiscal reforms aimed at advancing the goal of a balanced budget to 2008, instead of the original schedule of 2010 under the Medium Term Philippine Development Plan.

Adverse external developments brought about by high oil prices in the first half of last year and the financial meltdown in the US forced the Arroyo government to abandon the plan and postpone fiscal consolidation back to the original 2010 schedule.

Beltran told lawmakers that the slackening domestic output would continue to pull down revenues, especially with the easing inflation and lower interest rates.

He said the average inflation would likely soften further to 3.5 percent next year from the projected 3.9 percent this year and 9.3 percent in 2008, while the yield of the 91-day Treasury bill rate would ease to 5.0 percent.

Beltran said the national government must spend more for infrastructure and social services next year to offset the slowing domestic economy and cushion the impact of the global economic slowdown.