MANILA, Philippines?The Asian Development Bank has raised its growth projection for the Philippines in 2011, saying its earlier forecast did not take into account the recent rise in domestic investments, which are seen to beef up overall income levels.

From projecting a 4.6-percent growth for the country, ADB now expects the economy to expand by 5 percent in 2011.

The figure is within the government's own assumption of 5 to 6 percent, but is slower than 2010's actual growth of 7.3 percent.

Economists are on a consensus that most developing Asian countries would post slower growth rates this year on account of base effects. Since expansion rates were unusually high in 2010, there would be less room for expansion in 2011, they said.

Norio Usui, senior economist of the ADB for the Philippines, said on Wednesday the previous growth forecast of ADB was made in September, when the robust, full-year growth performance of the country for 2010 had not been recorded.

He said the Philippines' growth of 7.3 percent in 2010, the fastest in 34 years, came as a surprise for the economists of ADB and other institutions. The rate of expansion last year, he said, was boosted by the unusual rise in investments by Filipino firms.

"Based on that [higher investments], we changed our forecast for 2011," Usui told reporters at the sidelines of the launch of the ADB's 2011 outlook.

Nonetheless, Usui sees lingering challenges that the Philippines has to overcome to improve its competitiveness.

These include the country's still huge debt and inability to capture more foreign direct investments (FDIs). He said the need to spend more on infrastructure and to improve governance policies remain in order for the country to corner more investments from foreign businessmen.

Meanwhile, Usui said one encouraging aspect in the Philippine economy has been the ability of monetary authorities to keep the increase in consumer prices within manageable levels.

Latest government data showed that inflation hit 4.1 percent in the first quarter, prompting the Bangko Sentral ng Pilipinas to state that the full-year inflation target of 3 to 5 percent was still attainable.

But while latest inflation so far remains on track of staying within the full-year ceiling, some economists see the likelihood for inflation to breach the target.

Critics said the BSP was quite late in raising interest rates, which could prevent inflation from accelerating. While central banks of neighboring countries started raising rates in 2010, the BSP raised its own key policy rates only last March 24.

But the ADB said it would not criticize the move of the BSP to raise interest rates later than its counterparts.

ADB's Usui said that inflation in the Philippines has been more benign than the price movements in neighboring countries.

"The Philippine's central bank is doing a good job in managing inflation," the ADB economist said.