Brighter growth outlook, higher inflation for Philippines

An Australian think tank has raised its economic growth outlook for the Philippines. The International Market Assessment Asia (IMAA) said its forecast for the country's trend growth has risen from the earlier 4.9 percent to 5.9 percent until 2015, the fastest in 40 years. The improved credit profile and strong macroeconomic fundamentals will attract foreign capital flows into the country and lower the cost of funds, the IMAA said.

"We've lifted the outlook on our moderate economic risk rating to positive as a cluster of structural developments in the economy are lifting and stabilizing the growth trend," the think tank said.

Philippine gross domestic product (GDP) grew by a 34-year high of 7.3 percent in 2010 from 1.1 percent in 2009, on the back of strong consumption, investment, and net exports. IMAA said one of the key drivers of growth, remittance-led consumer demand, is projected to grow by 5.5 percent this year.

The think tank said demand for skilled workers in areas such as business process outsourcing will continue to grow and support economic expansion.

"These trends look set to continue through to 2012 as global growth strengthens. Consumer spending to 2015 may rise above our expected 4.4 percent in line with the increase in fixed investment and employment," IMAA said.

With the private-public partnership program of the Aquino administration in place, investments are expected to grow by 9.9 percent in the next four years, with the government to remain a key investment driver through its infrastructure plans.

IMAA, however, warned that inflation will likely double this year because of rising global prices and strong domestic demand. Philippine inflation averaged 3.8 percent in 2010.