MANILA, Philippines - A brewing debt crisis in Dubai has raised a specter of gloom on the Philippines, where many households have been relying on petrodollars sent home by a large pool of overseas workers in the Middle East.

While the immediate impact is in the form of escalating risk aversion in the financial markets, the sharpest blow could come from the potential loss of overseas Filipino jobs that, in turn, could curb remittance flows and dampen domestic consumer spending if the Dubai crisis worsens, analysts and economists said.

Global financial markets were recently rattled by news that Dubai?s main investment arm, Dubai World, was seeking at least a six-month delay on repaying its $60 billion in debt.

?I think risk aversion is resurfacing, just like what happened during the US subprime crisis. Depending on whether this will escalate, it will create an opportunity to take profits and the local stock market index could break down 3,000,? said Banco de Oro Unibank chief strategist Jonathan Ravelas. He said the risk aversion could also provide a boost to the dollar at the expense of emerging market currencies like the peso.

Since the debt crisis is coming in at a time that the global economy recovery remains fragile, Ravelas said this could mean a modest growth of 3.75 percent in overseas Filipino remittances for next year.

In the first nine months, money sent home by overseas Filipinos through the banking system grew 4.2 percent to $12.8 billion.

Jose Mari Lacson, head of research at Campos Lanuza & Co., said some publicly listed companies could also take a hit from the Dubai debt crisis.

?Dubai World has been driving property development and construction [which fuels the Dubai economy] that relies on overseas Filipino workers. They will have to stop spending and cut costs,? Lacson said.

He said this might result in higher loss of jobs in Dubai and the United Arab Emirates and could even cascade to other emirates. The spike in borrowing costs could also dampen the interest of Dubai-based companies that were planning to invest in the Philippines, he said.
?It won?t happen overnight though,? Lacson said.

He said property companies like Filinvest Land Inc. and Vista Land, which have exposure to Middle East-based Filipino workers, could take a hit if the crisis would escalate. Construction firm EEI Corp. is also seen bracing for some fallout, given its large projects in the Middle East.

?The development in Dubai will continue to unfold and might even worsen depending on how the world perceives Dubai World?s ability to pay its debts in six months? time. The initial reaction has been a flight to quality and this does not bode well for emerging markets if it persists,? said AB Capital Securities analyst Prince Anthony Yeung.

Justino Calaycay Jr., a dealer at Accord Capital Equities Corp., said the biggest impact could be on overseas Filipino employment, assuming that Philippine banks do not have a large exposure to Dubai World.

?But I don?t think this is something insurmountable,? Calaycay said.
?In a range of one to 10 [with 10 being the worst], the impact on the Philippines will likely be about six or seven but most of it is emotional reaction,? Calaycay said, noting that any debt default to the tune of about $60 billion would really send shock waves to financial markets.

Joseph Roxas, president of local stockbrokerage Eagle Equities Inc., expects only a minimal fallout.