Quezon City (14 November) -- The World Bank on Tuesday raised its economic growth forecast on the Philippines to 5.5 percent from an earlier target of 5.3 percent in March, citing improvement in the agricultural and export sectors, and rapid growth of dollar remittances from overseas workers.

It also raised its 2007 gross domestic product (GDP) growth forecast on the Philippines to 5.7 percent from 5.6 percent.

The World Bank also said that a lower budget deficit cut by increased tax revenue from the reformed value added tax should put the government in a better position to increase social sector spending.

The government earlier announced a P50.4-billion budget deficit for the first nine months of the year, lower than the P122 billion programmed for the period.

The peso and stock markets have also reflected the improving fiscal position of the country, with both trading at historical highs aided by increasing inflows from foreign investors.

The peso is trading at 49 against the US dollar, a four-year high, while the Philippine Stock Exchange composite index is approaching the 2,900 levels, its best performance in over nine years.

"Progress with fiscal consolidation objectives has contributed to buoyancy in the financial markets. The adjustment that has occurred in the fiscal front should not be underestimated. It has been significant and will improve the ability of the government to spend more for more productive things without undermining its targets," the agency said.