MANILA, Philippines--The World Bank has raised its economic growth forecast for the Philippines to 3.5 percent from 3.1 percent, citing healthy inflow of remittances, which are seen to expand this year at a faster-than-expected rate, and robust public spending.

?Growth in private consumption is projected to hold up well in 2010. The rising precautionary savings that dampened spending in 2009 will likely diminish as consumer expectations gradually improve over the next 12 months,? Eric Le Borgne, senior economist at the World Bank, said in a statement.

Economists said the uncertainty caused by the global economic crisis forced some consumers to exercise restraint in spending, choosing to save more to better secure themselves from the potential impact of the turmoil.

This year, however, projections of a recovery were seen to encourage consumers to revert to their normal spending habits.

Le Borgne said a sustained rise in remittances would further fuel consumption, the major growth driver of the domestic economy.

The BSP yesterday reported that remittances in January amounted to $1.4 billion, registering an annual growth rate of 8.5 percent.

Le Borgne also said that foreign companies still reeling from the effects of the latest global crisis were being forced to reduce operating cost such as by sourcing their workforce from the Philippines and other countries where labor was considered cheaper.

He said deployment of Filipinos to work offshore continued to rise by 11.7 percent from January to November last year. The World Bank expects the additional Filipinos sent to work abroad to trigger a rise in remittances in 2010.

The World Bank official added that many companies operating in the country would replenish their stocks, thus increasing their demand for raw materials. He added that companies belonging to the business process outsourcing industry would continue to expand and new players might enter the market.

While citing the country?s growth potential, the World Bank considers poverty reduction as one of the biggest challenges confronting the Philippine economy. Although the country managed to grow even at the height of the global turmoil last year, this did not result in reduction of poverty incidence, which was estimated at about a third of the country?s about 92 million population.