GOLDMAN SACHS is bullish that the Philippines, after registering a disappointing 0.8-percent expansion in the third quarter, will record a faster growth in 2010 of 4.2 percent.

The third-quarter performance was below most expectations, but the investment bank said growth would accelerate in the coming quarters.

“Although [third-quarter] data are weaker than expected, we continue to see signs of credible recovery over the next few quarters,” Goldman Sachs said in its latest paper on the Philippine economy.

The investment bank noted that the low-interest rate environment, made possible by the move of the central bank to keep its policy rates at historic lows, would eventually bolster demand and, therefore, boost production by the manufacturing sector.

From December 2008 to July this year, the Bangko Sentral ng Pilipinas implemented a series of interest rates cuts in a bid to influence banks to lower their lending rates as well.

The supposed increase in borrowings resulting from low interest rates should lead to higher consumption and investments, monetary officials said.

Since July, the BSP has yet to touch its key policy rates.

BSP Governor Amando Tetangco Jr. earlier said the central bank was poised to keep its policy rates at record lows of 4 and 6 percent for overnight borrowing and lending, respectively, until the economy shows solid recovery.

Goldman Sachs also said remittances, which largely fuel consumption of many Filipino households, and government spending would likewise help accelerate growth in 2010.

The bank expects remittances to rise by 12 percent next year, higher than the 6-percent forecast made by the International Monetary Fund.

Analysts said that remittances, which were earlier expected to contract due to layoffs in recession-afflicted countries, have continued to grow because Filipinos displaced from their jobs were outnumbered by ones who were newly hired in alternative labor markets.

Goldman Sachs said the Philippine peso, buoyed by rising inflows of remittances, could appreciate to as high as 44.5 against the US dollar over the next 12 months.

In the third quarter, the economy, measured in terms of its gross domestic product (GDP), grew by only 0.8 percent year-on-year.

This has raised doubts on the economy’s ability to still meet the government’s full-year GDP growth target of at least 0.8 percent, although government officials said the goal was still attainable.

Growth for the second quarter, which was earlier reported to have reached 1.5 percent, was revised to a similar growth figure of 0.8 percent.

Goldman Sachs said growth in the first three quarters, averaging 0.7 percent, was boosted by personal consumption and government spending but weighed down by anemic investments. Exports continued to decline, although at a slower pace, due to still weak demand from the United States and other export markets.

The bank said, however, that business activities could pick up next year as higher spending increases income of the manufacturing sector as well.