MANILA, Philippines -- The peso has outperformed most emerging market currencies so far this year and is likely to prove a store of value in 2009 as the economy is less vulnerable to the factors hammering markets elsewhere.

The country is likely to be the only nation in Southeast Asia to post a sharp pick up in its balance of payments surplus in 2009, partly the result of loans and privatization proceeds.

The economy is also less dependent on exports compared with its Asian neighbors, an unexpected bonus when world trade is shrinking and big markets are in recession.

The country's banks have little exposure to the credit problems being experienced elsewhere and the government's finances are far less reliant on overseas debt than in the past.

The big unknown is remittances from Filipinos working abroad, a driver of domestic consumption and pillar of the country's balance of payments. But even in this sector, the Philippines may be better off than many other countries.

"I think what is making it an outperformer is really because of the fact that our number one export, which is really people as reflected in the remittance numbers, will probably be resilient," said Wilfred Song Keng Po, managing director for fund management at AIG Investments in Manila.

"I'm looking at 10 percent decline for remittances as a worst case scenario," he said.

The peso has held its ground so far in 2009. It is down just 1.0 percent against the dollar, when other emerging market Asian currencies are down an average of more than 3.0 percent. Emerging currencies elsewhere are down an average of 5.0 percent.

At 48 per dollar on Tuesday, analysts said the currency might drop to around 50 in coming months if remittance flows disappoint -- a modest fall compared to those already seen in other currencies. The Korean won, Asia's worst performer, is down almost 9.0 percent and has been far more volatile.

NURSES, DOCTORS, HELPERS

The central bank expects 2009 remittances to match 2008's record level of $16.4 billion. Analysts say that is optimistic.

A Reuters poll forecast a 6 percent drop, the biggest fall in nine years and the first drop since 2001.

Remittances are the biggest source of overseas income in the Philippines, generating over a tenth of gross domestic product.

And as the fourth-largest recipient of remittances in the world behind Mexico, China and India, the 14th, third and 12th biggest economies in the world, the Philippines punches well above its economic weight as the 45th biggest economy.

A report prepared for the World Bank sees remittance flows from overseas workers to East Asia and the Pacific falling as much as about 8.0 percent this year, in line with its forecast for developing countries in general, after rising about 7.0 percent in 2008 and by double digits in 2007 and 2006.

Still, the forecast of a drop in remittances for the Philippines this year appears less gloomy compared with an official estimate of a 10 percent fall in such inflows to Indonesia, where remittances reach about 4.0-6.0 percent of GDP.

Filipinos are spread out overseas and hold varied jobs -- from nurses and lawyers to domestic helpers -- providing some resilience in remittances.

"Overseas Filipinos are well diversified geographically. This is unlike overseas Mexican workers, who are almost all in the US," Cem Karacadag, analyst at Credit Suisse, said in a note.

Still, such diversification may not count for much when the financial crisis is reaching all corners of the world, said Frederic Neumann, HSBC senior Asian economist.

Those signs may already be emerging. Cash sent home by overseas Filipinos registered the lowest annual growth in five years in January at just 0.1 percent.

SHARP RISE IN BOP SURPLUS

Nevertheless, it would take a substantial fall in remittances to raise worries about the emergence of a structural external payments imbalance in the Philippines, analysts said.

"Despite a slump in growth and peso volatility, we cannot quite find the pressure points that plagued the Philippines in the past," Neumann said in a note, referring to the country's legacy of heavy reliance on overseas borrowing to fund its budgets.

Outstanding government debt dropped in 2008 to 56.3 percent of GDP from 77.7 percent in 2003.

The central bank expects a 2009 balance of payments surplus of $700 million, sharply up from a four-year low of $89 million last year. Analysts forecast falls in the BOP surpluses in Thailand, Malaysia and Singapore and a BOP deficit in Indonesia.

Philippine export receipts make up about two-fifths of domestic output, much lower than in South Korea and Taiwan at nearly 64 percent and about 66 percent, respectively.

"From a pure balance of payments perspective, the collapse in oil prices and softer food prices internationally is going to outweigh the loss from declining remittances," said Nicholas Bibby, regional economist and strategist at Barclays Capital.

"Against the other currencies in the region, the peso is going to probably hold its value or even see appreciation."