After a 6.5-percent year-on-year expansion in the first quarter, the economy grew a further 6.2 percent, bringing first-half expansion to 6.3 percent which is considerably better than the 4.7-Spercent growth rate for the same period in 2003.
Morgan Stanley’s economist for southeast Asia, Daniel Lian, said in the report that the key driver of growth remains private consumption.
"It contributed to three-quarters of growth in the first half as household spending was buoyed by a pickup in export earnings and overseas workers remittances as well as election spending."
He said both investment and exports were also helping growth.
"Despite our belief that the economic deceleration is already well underway in the third quarter, we are raising our full-year 2004 GDP growth forecast from 4.5 percent to 5.6 percent anticipating a second-half growth rate of only 4.9 percent," Lian said.
The government target is GDP growth of between 4.9 and 5.8 percent.
"We have consistently viewed President Gloria Arroyo and her administration as a pro-restructuring government," Lian said.
"However, reform has proved to be extremely difficult to implement by Arroyo. This is perhaps due to the fact that her ascent to the Presidency in January 2001 was without a direct electoral mandate.
"As a result, it has become difficult for her administration to institute administrative reform against oligarchies such as the Catholic Church, landlords and big business interests.
"Despite a fresh mandate, her razor-thin margin of victory and a continued deterioration in the fiscal environment mean Arroyo must deliver effective reform in time to dispel doubts about her legitimacy and win the confidence and support of the nation."
Lian said he was not surprised that Arroyo had upped the ante on reform by warning that the country faced a fiscal crisis.
"In our view, Arroyos comments about the precarious state of public finances are clearly designed to help mobilize support for her planned tax increases, a critical first step of her reform," the report said.