Standard Chartered Bank has raised its economic growth forecast for the Philippines in 2007 to 6.5 percent from 5.1 percent previously, Philippine media reported on Thursday.
The bank also raised its economic growth forecast in 2008 to 5. 3 percent from 4.5 percent, ABS-CBN reported.
In its latest report, Standard Chartered said it expected domestic demand to grow significantly this year after strong private consumption, government spending and domestic investment in the second quarter.
"A favorable job market, especially services, should support private consumption, especially if OFW (overseas Filipino worker) remittance inflows are undisrupted," economist Francis Cheung with Standard Chartered said.
She said that remittances from overseas Filipino workers may rise by 10 to 15 percent this year.
Remittances rose 18 percent year-on-year in the first half of the year but its growth may slow down along with the economy of the United States, where over half of the country's remittances come from, Cheung said.
Total remittances account for 12 percent of the gross domestic product, the measure of economy.
Standard Chartered also said it expected export growth to stay soft this year and rise by an annual 6.8 percent.
Export growth eased to 6.6 percent in the first half from 15 percent in the same period last year.
While exports to the United States is weak, it was partly offset by strong exports to the Chinese mainland and Hong Kong, she said, adding that the trend is likely to continue in the near future, especially if the latest market turmoil dent U.S. consumer spending.
Standard Chartered sees the central bank of the Philippines cutting its rates by end of the year on benign inflation.
Inflation came in at a slower pace of 2.4 percent in August while money supply growth fell below 20 percent.
Standard Chartered also said the country's fiscal deficit this year may slightly exceed the government's official target of 63 billion pesos (1.35 billion U.S. dollars) by 8 billion pesos (1.71 billion dollars).
"While we maintain that the government's fiscal target is too ambitious, we are less pessimistic than the market. On top of recent improvements in tax collection, privatization projects, if successfully concluded, would also bring additional proceeds to cover the revenue shortfall," the economist said.
Source: Xinhua
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