By MAX ESTAYO

Third largest lender Bank of the Philippine Islands said yesterday the peso may rise further by 5-8 percent this year to 37-39 to the US dollar, GDP growth lower at six percent and loans up by an impressive 15 percent.

The bank, in its yearly economic briefing, said the peso will sustain its 19 percent growth last year, from eight percent in 2006 and six percent in 2005.

Aurelio Montinola III, president of BPI, said peso appreciation would be lower this year due to "correction".

"We have seen three straight years of peso appreciation. The market tends to correct at some point," Montinola said.

The continued weakness of the dollar will add support to the local currency, Montinola said, which in turn will help the domestic economy weather the sharp rise in oil prices.

The Ayala-owned bank forecasts Philippine growth to slow down to 6-6.2 percent this year from the projected 6.9-7.3 percent growth for 2007.

Meanwhile, it expects consumer prices to rise to 3.8 percent from 2.8 percent last year, at the midpoint of the central bank’s expected range of 3-5 percent, on escalating oil prices.

The economy will reel from the slowdown in US growth as the subprime crisis worsens, the bank said, but it expects domestic demand to provide support to the local economy this year.

The bank said domestic consumption would remain resilient, on the back of continued increases in remittances.

Government spending on infrastructure and construction will also boost growth, the bank said. The business process outsourcing, real estate, tourism and tourism-related services, and other service sectors will also contribute to the expansion, it said.

On the back of this growth, Montinola said the bank is expecting to grow its loans by 12 percent this year, buttressed by a 15-percent growth in consumer and SME (small and medium enterprises) loans.

"We’d like to be more positive but we will have to monitor the US and the world economy," he said.

The SMEs account for 25 percent of the bank’s total loan portfolio and consumer, 22 percent, Montinola said.

He said loans to the corporate sector are seen to grow by 10 percent as the bank expects strong demand from hotels and real-estate sectors.

Last year, the bank’s gross loans grew by 10 percent or P30 billion more from a year earlier, Montinola said.

Lending to consumer and the corporate sectors went up by a robust 15 percent and 10 percent, respectively, he said.

Montinola said after three years of single-digit growths in lending, the industry and the bank is poised for "three years of double-digit lending growth."

"People have more confidence in the economy, loan demand will pick up," he said.

Montinola said "there will be growth" in the bank’s bottom lines this year but there will also be "compression in spreads," affecting the lender’s net interest income, a major income driver.

The lender was expecting net profits to grow by 10-12 percent last year.