MANILA - The Philippines said Tuesday that its budget deficit had soared 556.2 percent year on year in the first five months as it increased spending to stave off recession.

The government released figures showing it was 123.2 billion pesos ($3.5 billion) in the red by the end of last month, compared with 18.8 billion pesos at the same point in 2008.

It represents almost half of Manila's full-year target deficit ceiling of 250 billion pesos, although it is still below the government target of 155.1 billion pesos for the period.

"We are confident the government will meet its programme," Finance Secretary Margarito Teves said, with domestic and foreign borrowing likely this year to bridge the budget gap and raise the funds required for stimulus spending.

Manila signed an agreement in Tokyo last week in which the Japan Bank for International Cooperation would guarantee 95 percent of up to US$1 billion ($1.46 billion) in yen-denominated "Samurai bonds" to be issued by Manila.

"We're still open to issuing global bonds," Teves added but stressed that most of the government's borrowing would be from domestic sources.

He said the higher deficit was largely due to the global economic slowdown, which led to less revenues while forcing Manila to spend more to stimulate the economy.

Teves stressed the government would "continue with our spending on health care, services, infrastructure."

If it had not been for the global financial crisis, "we would have maintained our target deficit for the year at about 40 billion pesos," Teves said.

He said that based on the latest figures, the government was expecting economic growth of 0.8 percent for the whole of 2009 despite warnings of a shrinkage.

Economic expansion stalled to 0.4 percent in the three months to March as the country continued to be hit by the global slump, which has led to a dive in key exports.

Manila posted an 11.4 billion-peso deficit in May, compared with a surplus the previous month and May last year.

Teves said government spending rose 16 percent from a year earlier to 115.6 billion pesos for the month, and to 579.1 billion pesos for the first five months.

However revenue declined 2.5 percent to 104.2 billion pesos for May and by 5.4 percent to 456.2 billion pesos in the first five months.