THE PHILIPPINE economy could grow 6.5-7 percent next year, sustaining this year?s above-trend pace of expansion alongside a benign inflation environment, according to the chief strategist of Banco de Oro Unibank.

BDO economist Jonathan Ravelas, in a recent investment forum, added that inflation rate next year would likely be stable at 3 percent on the basis of a more stable exchange rate and a recovery in the agricultural sector.

?Today, the Philippines is seen in a different light. We are now perceived as a country with better macroeconomic fundamentals not seen in the last 35 years,? Ravelas said. ?We have experienced roughly 47 quarters of uninterrupted growth supported by low inflation, low interest rates and stable foreign exchange rates.?

While it is quite clear that the United States and the rest of the world was still some distance away from full recovery, Asia appeared to be in the lead as its favorable demographics provided a steady labor supply supportive of consumer demand, Ravelas noted.

?Asia learned its lessons from the 1997 Asian financial crisis,? he said.

Ravelas said he was very upbeat as he was deeply emboldened by the significant stability that has returned to Philippine financial markets.

?However, I would not advise any exuberance just yet. There are still enough potential risks from the international scene that we should prepare for,? he said.

Barring external shocks, Ravelas projected that local interest rates would remain stable with the three-month Philippine Dealing System Treasury Fixing Rate (PDSTF) likely ranging between 1.25 and 4.5 percent and the five-year PDSTF between 4 and 5.5 percent.

Ravelas added that he shared the view of most analysts that the peso would be even stronger in 2011 as capital flows to capital markets in the region would remain robust, alongside resilient overseas remittances.

He projected the local currency to range between 40 and 46 against the dollar next year, with a year-end closing forecast of 44:$1.

?A more stable exchange rate will have beneficial effects on interest rates that should help sustain the growth momentum,? he said.