MANILA, Philippines – (UPDATE) President Gloria Macapagal-Arroyo allayed fears anew that the Philippines would be affected by the US economic meltdown, saying that local banks were stable and only had little exposure to the bankrupt investment firms in the US.

Speaking before the International Agribusiness Exhibit at the World Trade Center Thursday, Arroyo also said that the US was no longer the Philippines’ top export market and the Philippines was looking at marketing products in Europe and other countries like China and Japan, whose trade partnership with the Philippines was strengthened with the ratification of the Japan-Philippines Economic Partnership Agreement (JPEPA).

"The US financial crisis appears deeper than most anticipated. Any slowdown or even recession in the US is not good for the global economy. That said, the Philippines appears in relatively good shape," said Arroyo.

"The potential exposure of our banking sector to the asset deflation triggered by the sub-prime mortgage losses in the US accounts for less than one percent of the total system assets here in the Philippines; This exposure is fully reserved our banks are well capitalized and the innate conservatism of our bankers is matched by the prudence of our regulators," she added.

Arroyo claimed that despite the unstable US market, the government has continued to work hard to manage inflation.

"We have been working hard on all fronts to manage inflationary pressures," said Arroyo, noting how the country’s inflation rate continues to level off.