SINGAPORE (Dow Jones) – Growing concern over the Philippines' widening budget deficit may weaken the peso, sending the dollar back above P50 later this year, analysts say.

The Philippine economy remains in the doldrums even as other Asian countries start to recover from a deep downturn, crimping tax revenue. While many Asian currencies have rallied against the dollar, the peso has foundered.

The peso closed at P48.065 to the U.S. dollar on Friday.

Dwindling tax and customs revenue will likely make it difficult for Manila to implement a stimulus package worth almost 5 percent of domestic product approved for this year, without breaching its deficit target.

This is a worry in a country that has in the past been notorious for budget overruns, which have resulted in financial and even political instability. Higher deficits now imply an increase in the debt load and may force the next government to raise taxes or cut spending dramatically after next year's presidential election. Both would hurt future economic growth.

Early indications are that the government won't meet this year's deficit target of P250 billion, or some 2.5 percent of GDP for 2009. In the first half, the deficit rose more than eight-fold compared with the same period last year, according to data released last Monday.

The government says it still expects to keep the annual deficit below the target, but its revenue assumptions for the second half are likely to prove optimistic.

"They expect asset sales (through privatization of state-owned companies) and Congress to pass revenue measures in the second half, both of which in our view are unlikely given the economic environment and the elections next year," analysts at Royal Bank of Scotland said Tuesday. "While expenditures are sharply on the rise to support growth, fiscal deterioration is also being pushed by revenue collections heading the other direction."

RBS forecasts the full-year deficit will hit 4.3 percent of GDP. It expects the dollar will rise to P51 by September and P52 by June, soon after the elections scheduled for May.

The economy, while vastly improved over the last decade, pales in comparison to those some of the Philippines' neighbors.