Bangko Sentral ng Pilipinas governor Amando Tetangco Jr. yesterday said the economy could have grown by seven percent last year, the highest in 30 years.

He said he is confident last year’s economic growth will not be a "short-term phenomenon" but will to be sustained in the coming years.

"Our model on the Philippine business cycle shows that the downward phase of the country’s business cycle reached its turning point in the last quarter of 2006," Tetangco told a business meeting.

"Thus," he added, "we are now in the continuing upward phase of the business cycle, as validated by the strong growth of the economy in the first three quarters of 2007."

Tetangco said "continuing economic growth" will be supported by the "combined acceleration of the industry and services sectors."

He said "consumption and investments, both private and government," will also contribute to the expansion.

The Philippines is likely to post its highest growth in three decades of seven percent in 2007, Tetangco said, after a brisk 7.1-percent expansion in the first three quarters.

Tetangco said the domestic economy has been on "sound macroeconomic fundamentals," putting it on better footing to ride out the "headwinds" or threats to the economy including the sub-prime crisis, and the rise in prices of oil and non-oil commodities.

"While the challenges appear staggering and mainly beyond our control, the Philippines is in the best macroeconomic shape it has been in two decades as a result of the significant structural and policy reforms undertaken over the recent years, making it more resilient in the face of global challenges," Tetangco said.

He said a strong financial system "that is flexible in the face of growing global integration and innovation," which the BSP will continue to "nurture," will also help the economy meet the external challenges.

However, Tetangco warned that the Asian region, including the Philippines, will not be "immune" from the unwinding of the sub-prime crisis, which is expected this year and which is seen slowing the US economy.

"As the real sector becomes affected, this is an event that could prove to be critical to the Asian growth story. The region has become less dependent on the US but it is still not immune to a US slowdown," Tetangco said.

"Intra-Asian trade has grown but most of the growth has been an increase in trade with China and India, a portion of whose imports from the region are also re-exported to the US," Tetangco said.