Bangko Sentral ng Pilipinas governor Amando Tetangco Jr. yesterday said the Philippines is in the direct path of a potential US downturn.

"Although the global financial markets appear to have stabilized, the full impact of the US subprime mortgage crisis woes has yet to be felt," Tetangco said in a meeting with foreign correspondents.

Tetangco said the export sector could soften as the US economy, the country’s major trading partner, slows down.

Also, "movements in economic prices," such as the exchange and interest rates, "could result in further risk aversion against emerging markets, including the Philippines," Tetangco said.

Tetangco said there is a widespread expectation of a US slowdown this year, although it is still to be seen if it would be a "mild slowdown" or a recession.

"Either way, a weaker US economy is expected to slow down global growth, although growth in emerging markets could temper this," he said.

The downturn will not actually have a "significant immediate impact" on the Philippines, Tetangco said, but a "longer-than-expected US recession could take its toll on the economy."

Tetangco said apart from a cooling US economy, the Philippines also faces risks from high and volatile oil prices.

"In the absence of a change in OPEC’s qouta policies or a major global slowdown, international oil prices are likely to remain high due to continued geopolitical and supply risks coupled with strong global demand and continuing speculation in futures prices of oil," he said.

Prolonged high oil prices will threaten the country’s inflation outlook, Tetangco said.

Tetangco said risk aversion is a continuing concern as a result of the ongoing global financial market turbulence.

From the subprime crisis in the US last year, there came "reassessment, repricing and adjustment of risk positions," affecting not just the US market but the equity and exchange markets across the globe, Tetangco said.