MANILA, Philippines - Given the country's faster-than-expected economic expansion in the first quarter, Standard Chartered Bank raised its growth forecast for the Philippines this year to 5.9% from 3.3%.

The international bank said strong growth in the early part of 2010 will likely be sustained throughout the year.

"The GDP (gross domestic product) report shows that the Philippine economy is on a firmer footing than many, including ourselves, had expected," Standard Chartered said in a paper titled "Philippines: Strength from within".

In the first 3 months, GDP grew 7.3% from a year ago buoyed by global recovery, which spurred exports; election spending; and increased remittances from overseas Filipinos. The GDP figure exceeded the government's 2.9% to 3.9% growth projection.

Consumption, which makes up nearly two-thirds of the economy, was supported by a 7% annual rise in remittances and record spending by the government, including on infrastructure projects, ahead of a ban on new state contracts before the May 10 national elections.

Exports, on the other hand, surged 43% as demand for electronics shipments recovered from the previous year's crisis-induced lows. Exports account for about two-fifths of GDP in expenditure terms.

For the second half of the year, Standard Chartered expects investments in the Philippines to increase as the orderly elections and entry of a new administration are viewed positively by businesses.

"Going forward, the successful conclusion of the election has removed a key political uncertainty, and the recovery will remain supported by rising business investment and domestic consumption," the bank said.

The bank also expects the Bangko Sentral ng Pilipinas (BSP) to increase its key policy rates beginning third quarter as a response to decent economic growth. Raising rates is to ensure that higher income levels do not jack up inflation beyond targeted levels.

In the first four months of the year, inflation averaged at 4.3%, still within the government's full-year target of between 3.5% and 5.5%.

The BSP's overnight borrowing rate currently stands at a record low of 4%, and the lending rate at 6%.