MANILA - The Philippine economy may have grown by 2.6% in the third quarter of the year, within the 1.6-2.6% forecast of the government, according to the Development Bank of Singapore (DBS).

The Singapore-based investment bank said the growth was supported by strong consumer spending.

It noted that hefty dollar inflows from overseas Filipinos and the low inflation environment helped fuel consumer spending in the third quarter, which in turn, contributed to overall economic growth.

The government is set to release official third-quarter gross domestic product (GDP) data on Thursday.

In the third quarter of 2008, the economy grew by 4.6%. The government expects GDP to hit anywhere between 0.8% and 1.8% for full-year 2009.

Meanwhile, Union Bank of Switzerland (UBS) expressed concern over the government's worsening fiscal position, given the deterioration in its revenue growth.

"There is no question that the Philippines fiscal situation has deteriorated - with the weakness of the revenue line a particular cause for concern," UBS said in its latest investment report on the Philippines.

However, UBS said some of the deterioration in revenue is cyclical, and that the resulting deficit is now more easily sustained as the Philippines enjoys a combination of reasonable real and nominal economic growth prospects, plus an underutilized pool of domestic savings.

From January to October, the government's budget deficit hit P266.1 billion, already exceeding the full-year target of P250 billion.

UBS said the new administration will have to ensure that revenues pick up.

"There is danger that government revenues - the perennial bugbear of Philippine finances - do not recover with a pickup in the economic activity," UBS said.