The Department of Finance hopes to limit next year's budget gap to around P226 billion, far lower than the P290 billion ceiling programmed for 2011 if growth continues to expand at its present rate.

The Aquino administration has adopted a budget deficit that is about 3.2 percent of gross domestic product for next year.

However, noting the continued expansion of the domestic economy it is hopeful for a similar improvement in fiscal position with the budget gap seen to be just around 2.5 percent.

Finance Secretary Cesar Purisima said this is possible if the domestic economy continues to trudge its present growth path.

He explained that it is normal for a government's fiscal position to benefit from robust domestic economic growth since “everything being equal revenues goes up and deficit will be lower.”

“This is assuming we hit a seven percent (GDP for 2011),” he said.

GDP growth in the first half this year has surpassed expectations with the first quarter growth at 7.8 percent and the second quarter at 7.9 percent resulting to a 7.9 percent average for the first half, the highest after the 9.3 percent in the second half of 1988.

The Philippines' second quarter growth this year is also far higher than the 1.2 percent registered same period last year.

Purisima explained that for budgetary purposes, the government used conservative figures in their program and these include considering an output gap of five percent, lower than the seven to eight percent target; and inflation of three percent, the lower end of the three to five percent target.

Revenues are maintained at 15.6 percent of GDP at P1.41 trillion while tax revenues will rise to 14.1 percent due to tax measures.*PNA

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