The Philippine economy could grow faster than the government's target of 5 to 6 percent this year, driven by strong remittances from overseas workers and a recovery in trade, the economic planning secretary said.

Cayetano Paderanga also said that given a benign outlook for inflation, the central bank may hold the policy rate steady at a record low of 4 percent for the rest of the year.

''We're hopeful of going above 6 percent,'' Paderanga said of the outlook for growth in 2010 during an interview in his Manila office, adding growth would be at least 7 percent next year.

The government has set a growth target of 7 to 8 percent for 2011. Growth above 7.1 percent would be the fastest in 35 years. .

In the first quarter of 2010 the economy grew 7.3 percent from a year earlier, boosted by spending related to national elections in May, government pump-priming and a strong turnaround in exports.

''It could happen also that the second quarter may be around the same because election spending was still strong at that time,'' he said, adding the recovery in exports and the boost to consumption from remittances would also drive growth.

''The main engine up to this point, although we want to balance it with the others, with investments, is still remittances. And that looks, at least for now, that looks fine.''

In the first five months of the year, exports rose 39 percent from a year earlier as demand for the country's semiconductors products recovered.

Second quarter economic growth data is due on Aug. 26, the same day as the central bank's next review of monetary policy.

Paderanga, who also served as economic planning secretary in the early 1990s under Corazon Aquino, mother of current president Benigno Aquino III, said moderate inflation would allow monetary authorities to keep the policy rate at a record low of 4 percent.

Data on Thursday showed annual inflation in July came in at 3.9 percent, which the central bank said showed current monetary policy settings were appropriate. (Reuters)