MANILA - Uncertainties leading up to the May 2010 elections will keep private investment subdued but will help expand domestic demand, according to multilateral lender Asian Development Bank (ADB).

During the launch of the Asian Development Outlook 2009 Update (ADO) on Tuesday, ADB officials said that they expect elections to help the Philippine economy grow by 3.3% next year, higher than their recently revised 1.6% growth projection this year.

“Election spending from political parties and candidates add to the domestic demand,” said Neeraj Jain, ADB’s country director for the Philippines.

“In 2010, domestic demand will strengthen, supported by election spending through May and some expected improvement in the labor market resulting from a lift in business sentiment in the second half, on the assumption of smooth election and transition in government,” the ADO report said.

Jain stressed that a smooth transition of power in 2010 will add to the building of confidence of the business community.

In an economic briefing last August, Dennis Arroyo, head of policy planning at NEDA, told reporters that election spending would have a greater impact on the economy than in 2007 midterm polls, where election spending contributed 0.34 percentage points to the gross domestic product (GDP).

The report said that a major threat to the positive outlook for next year is the weaker than anticipated global economic recovery.

“That would hurt exports, foreign investments inflows, and consumer and business sentiment, which while showing early signs of improvement, remain fragile,” the report said.