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MANILA, June 9 (Reuters) The Philippines is relying on buoyant exports to make up for any drop in economic growth from lower government spending after Congress failed to agree to the 2006 national budget.

Budget Secretary Rolando Andaya told Reuters that third quarter economic growth could suffer because Manila will have to roll over last year's 919 billion peso ($17 billion) budget after Congress failed to pass the 1.05 trillion peso 2006 plan.

''We expect a slowdown in third quarter growth,'' Andaya said on Friday, adding that he was already preparing to file with Congress the government's proposed 2007 budget, initially pegged at 1.13 trillion pesos.

But Dennis Arroyo, director for national planning and policy at the state economic planning agency, said strong export growth this year could make a net contribution to economic growth, compensating for lower-than-expected government expenditures.

The Philippines has an economic growth target of between 5.5 and 6.2 percent in 2006. Gross domestic product grew an annual 5.5 percent in the first quarter of 2006 but rose only 0.9 percent on a seasonally adjusted basis from the previous quarter.

Philippine exports climbed 18.7 percent in April from a year earlier due to strong electronics shipments.

The pace of annual growth in April was down sharply from March -- some analysts warned it was a sign of a slowdown in the global electronics cycle -- but the April pace was still ahead of the annual 15.2 percent increase in the first four months of the year.

Exports are running well ahead of a government forecast of an 8 percent rise in exports in 2006.

The Philippines supplies about 10 percent of the orld's semiconductor manufacturing services.

BUDGET DEFICIT Members of the upper and lower houses of Congress failed to agree on President Gloria Macapagal Arroyo's budget after the Senate, packed with her foes, refused to reverse 26 billion pesos of cuts it made.

Andaya said the cuts would hit government funding for road and bridge projects and might hurt the Philippines' credibility with foreign creditors.

But the government has said its budget deficit this year might narrow from its targeted 125 billion pesos, or 2.1 percent of GDP, as the re-enacted budget would limit spending.

The Philippines' budget deficit in 2005 was 146.5 billion pesos or 2.7 percent of GDP.

The Philippines has a debt-to-GDP ratio of around 72 percent and around a third of its budget is spent on paying interest on its $76 billion debt.

The government is now stuck with an infrastructure spending budget of 64.3 billion pesos, the same allocation as in 2005. The 2006 plan had provided for a 52 percent increase in spending on roads, bridges and other capital projects The Philippines' current infrastructure spending budget, at around 2.39 percent of GDP in 2005, is one of the lowest in the region.

The budget department had released 30 billion pesos for infrastructure and social services in the first quarter this year, front-loading almost a third of its expected total capital outlays of 96.6 billion pesos under the 2006 budget proposal.

It also released additional allowances for government workers amounting to about 13 billion pesos this year.

($1 = 53.14 pesos) REUTERS PV BST1724