Philippines' Arroyo signs law on 2010 spending budget

MANILA, Feb 9 - Philippine President Gloria Macapagal Arroyo signed into law on Tuesday a measure that sets a budget of 1.541 trillion pesos this year, up 8 percent from 2009, including stimulus spending on infrastructure and social services.

Manila has said it would continue with fiscal stimulus policies this year, although at a reduced level, with the economy seen expanding at a faster rate of 2.6-3.6 percent after last year's tepid 0.9 percent growth.

"In this budget, we are saying that we will not break our vow to ramp up social spending, but in doing so we will not be breaking the bank," Budget Secretary Rolando Andaya said in a statement.

The newly signed appropriations law assumes a budget deficit of 233.4 billion pesos, or 2.8 percent of GDP, this year. But the government is studying raising the 2010 budget gap goal to 293 billion pesos, or 3.5 percent of GDP, as it expects typhoon rehabilitation spending would outpace any improvement in tax collection.

Finance Undersecretary Gil Beltran said last month economic managers were considering lowering the Bureau of Internal Revenue's revenue goal by 5 percent to 830 billion pesos and the Bureau of Customs's target by 11 percent to 275 billion. [ID:nSGE6050BF]

Anticipating the revenue weakness, the government had raised its foreign borrowing plan for 2010 to $4.953 billion, including loans from official development agencies, from an original programme of $3.8 billion.

In the final version of the budget, Arroyo vetoed lawmakers' move to reallocate 64.6 billion pesos from the government's proposed interest payments to various projects because of the absence of funding sources.

"Without new revenue measures, the executive branch will have no cash support for the items of appropriations introduced by member of Congress," Andaya said.

"Financing the 64.6 billion pesos worth of earmarks and insertions through borrowings will push up the deficit to 358 billion pesos, or 4.3 percent of GDP," he said.

The education department will get the lion's share of the budget, at 174.9 billion pesos, followed by public works with 135.6 billion, the interior and local government department with 66.45 billion pesos and the defence department with 57.84 billion pesos, Andaya said. (Reporting by Karen Lema; Editing by Rosemarie Francisco)