The Philippines may be headed for a slowdown next year, a spillover effect of the ongoing US financial crisis, but the domestic economy is far from plunging into a recession, two experts said.

University of the Philippines economist Raul Fabella and former secretary of finance Ernest Leung spoke at a forum organized by the nongovernmental organization Action for Economic Reforms.

“The Philippines will definitely feel the impact of the US crisis—lots of jobs may be lost and the country’s capacity to borrow will suffer—but I don’t think we will go into a recession,” Fabella said, noting that recession is technically defined as two consecutive quarters of year-on-year contraction of a country’s gross domestic product.

Fabella has projected that growth of the Philippine economy would slow down further to 3.5 percent next year from a projected 4.4-4.9 percent this year as the local business environment feels the adverse effects of the financial turmoil in the United States.

His growth forecast for 2009 is less optimistic than the official projection of between 4.1 and 5.1 percent set by the Arroyo administration’s economic team.

Leung agreed that the impact on the Philippine economy by the credit crunch in the United States would be worse than what the government’s economic managers expect.

While government officials said overseas Filipino workers would not be much affected by the crisis in the US financial sector, Leung said there was also a considerable number of Filipinos employed in American banks and financial institutions.

“The first round of effects will be on the Philippine financial sector. The next round will be the real sector, when exports begin to slow down,” Leung said at the forum.

The United States accounts for 17 percent of the Philippines’ export earnings. Although the share of the United States to the total dollar earnings of Filipino exporters had diminished over the years, analysts have said that the current share was still significant.

“Exports will also slow down. Even though there are already new export markets in Asia, these markets, including China, are also dependent on the US economy,” Leung said. “But still, I don’t see these impacts to be significant enough [to cause a recession in the Philippines],” Leung said. With editing by INQUIRER.net