MANILA - Investment bank Union Bank of Switzerland (UBS) has upgraded its economic growth outlook for the Philippines next year on the back of a strong recovery in the Asia Pacific region.

UBS economist Edward Teather said in a report titled “ASEAN: 2011 Forecasts” that the country’s gross domestic product (GDP) is likely to expand by 5% instead of 4.6% next year.

Teather said the investment bank has decided to retain the projected GDP growth of 1.3% this year in light of the damages caused by tropical storm Ondoy and typhoon Pepeng.

He pointed out that the growth across the region would continue to record health outcomes in the immediate future supported by pent-up demand, inventory cycle, fiscal and monetary policy.

UBS also upgraded its GDP growth forecasts for Thailand to 6% instead of 5%, Indonesia to 6% from 5.3%, and Malaysia to 6% from 4.9% next year.

“The ongoing momentum in the data flow leads us to upgrade our Thailand, Indonesia, and Philippines forecasts for 2010 in the wake of prior upgrades to Singapore and Malaysia,” Teather said.

He added that the impact of the recent calamities on the domestic output has yet to be assessed but would be felt in the fourth quarter of this year.

“Regarding Philippine growth, the impact of the recent tragic flooding in Manila is as yet unknown. We assume a relatively modest impact on growth in the fourth quarter with an offset in the first quarter of 2010 as rebuilding progresses,” the economist said.

However, he warned that growth momentum would slowdown towards more sustainable rates starting the second half of next year until 2011.

“Nonetheless, as we have agreed previously, where the growth recovery is driven by significant policy stimulus and marked cyclicality, we expect growth momentum to fade in the second half of 2010 leading to a slower 2011 growth on average,” he said