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July 30, 2008

Philippines: Govt to propose $32bn in spending for 2009
The Philippine government plans to propose budget spending next year of 1.41 trillion pesos ($32 billion), up around 14 percent from this year, Reuters quoted senior government officials as saying Tuesday.

The government also expects a budget deficit of about 40 billion pesos, or about 0.5 percent of gross domestic product next year, to be partly funded by borrowings, Ralph Recto, newly appointed economic planning chief, told reporters.

"It's hard to say. I think that we might be better off with a little deficit," Recto told reporters when asked if the government will try to balance the budget next year.

"I think half a percent of GDP is manageable," he said, adding that the government should stick to a plan of balancing the budget by 2010, which was outlined in the government's five-year plan.

The Philippines had hoped to balance the budget this year for the first time in more than a decade but abandoned that plan to allow for more spending aimed at boosting the local economy at a time of high inflation and slowing demand for the country's exports.

The government has said it now expects a fiscal shortfall of 40 to 75 billion pesos this year, or 0.5 percent to 1 percent of GDP, compared with a deficit of 12.4 billion pesos in 2007.

Recto said budget figures had not been finalised but 2009 spending needs to increase by 11 to 15 percent to keep up with inflation, which the central bank said could hit a 14-year peak of just over 12 percent this year.

The 2009 spending plan would be a performance-based budget bill, with various state departments and agencies receiving allocations commensurate to how much they delivered on goals in 2007, when the Southeast Asian economy posted its highest growth in 31 years.

"You want to sustain this growth as well, but of course we live in a different environment today. You have high oil prices, you have inflation up there and that will also affect our ability to raise revenues," Recto said.

Cabinet secretary Silvestre Bello said the agriculture, public works, social welfare, and education departments would get higher budget allocations next year.

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