MANILA (Dow Jones) – When Benigno Aquino III is sworn in as Philippine president Wednesday, he'll inherit a yawning budget deficit – projected to hit a record P300 billion this year – but also an economy regaining momentum.

Aquino won a landslide victory in May elections on a platform promising clean government and honest efforts to address investors' concerns about the country's business climate.

But the most pressing concern for this scion of one of the Philippines' most distinguished political families may be getting the country's fiscal house in order.

Aquino has pledged to consider new taxes only as a last resort, "if we have done everything and the deficit as is still unmanageable." Observers say he may well find himself in that position.

At least he'll be surrounded by a clutch of experienced hands, including several figures who crafted outgoing President Gloria Macapagal Arroyo's fiscal reform program.

Arroyo's program, particularly a 2005 bill that added P80 billion to public coffers by increasing the value-added tax and expanding its coverage, was on its way toward achieving a balanced budget when the global financial crisis hit in 2008. The crisis forced the government to increase spending to reverse the economic slowdown.

The economy lately has shown strong signs of recovery, growing 7.3% on-year in the first quarter of 2010.

Aquino was expected to announce his Cabinet Tuesday afternoon. The frontrunner to become finance secretary is Cesar Purisima, who for a time held that role (and also served as trade secretary) under Arroyo.

Purisima helped design Arroyo's fiscal reform package, and was especially committed to going after tax evaders and smugglers.

Purisima was one of a number of officials who quit in July 2005, hoping their resignations would force Arroyo to step down over allegations of fraud in her 2004 presidential election victory.

Outgoing Finance Secretary Margarito Teves, who met with Purisima on Monday, said the new administration will be starting at a disadvantage because the government's revenue-generating position has been weakened at a time when its fiscal requirements are higher.

Teves said new taxes would provide the government with the flexibility to manage the deficit while it seeks to improve the efficiency of tax collection. He said pending tax proposals, including raising VAT rate to 15%, could bring additional annual revenue of P200 billion by 2016, the year Aquino ends his six-year term.

Aquino also has pledged to attract new investment to the Philippines, which has seen foreign direct investment decline in recent years. Aquino has said his government will address a litany of complaints from investors, including poor infrastructure, costly electricity, questionable law and order, and unstable government policies.