PRESIDENT Arroyo yesterday said the Philippine economy will continue to be on the growth path despite the US economic slowdown because its strength is powered by domestic demand and not by exports.

Arroyo, in a speech before the Swiss Chamber of Commerce in Zurich, Switzerland, said exports to the US declined from 28 percent when she became president in 2001 to 18 percent last year because the Philippines has diversified its markets.

"Our growth in 2007 was not export-led. It was domestic-oriented led. It was led by investments and led especially by government investment in infrastructure. Is this sustainable? Yes, it is sustainable, because we have a lot on infrastructure and yet we brought our budget deficit down," she said.

"The Philippines is on a path to permanent growth and stability even as we are in the midst of world uncertainty...We are vigilant that our efforts will not derailed by the sub-prime crisis and the subsequent credit crunch in the US," she added.

Arroyo is in Switzerland to attend the World Economic Forum in Davos, meet with world leaders and businessmen, and consult her international board of advisers.

Arroyo said her claim will be borne out when the government comes out with its economic performance report for 2007 on February 15.

"(Maybe) we will be surprised ourselves and find out that we have achieved the balanced budget. That would be three years ahead of schedule. It was supposed to be in 2010," she said.

The President said the Philippines has "learned much" from the 1997 Asian crisis by having "bilateral and regional arrangements which are still in place today."

She also said government has done its own share of financial and fiscal reforms.

Press Secretary Ignacio Bunye said while the US economic slowdown could dampen the growth of emerging markets, "the Philippines would likely withstand the adverse effects of such a development largely because of its improving economic fundamentals."

Bunye said the US recession could also be a boon to the Philippines because it might increase investments of business process outsourcing in the country by international companies that are seeking to further reduce their costs.

"We remain vigilant and we know that the BSP is closely watching developments on the monetary front and that gives us great comfort that we can and will weather any storm," he said.

Arroyo also told Swiss businessmen in an open forum that the government does not meddle in the affairs of the Bangko Sentral.

Asked about mothballed NAIA Terminal 3, she said: "As long as investors follow Philippine and international laws, there is no need to worry."

In her speech before the Swiss Chamber of Commerce, Arroyo boasted that the Philippines remains a competitive location for investments manufacturing and high-end services. She also invited investors to take advantage of the opportunities in the Philippines.

She said the 7.1 percent economic growth in the first three quarters is the Philippines’ "fastest growth in a more than a decade" and "the fastest growth in Southeast Asia."

She cited the strong peso and stock market, the low interest rates, controlled budget, high revenue collections, the booming BPO investments and the potentials of other industries such as mining and medical tourism.

"We are in a strongest position than ever to instill permanent economic gains in our country even at times of global uncertainty and we are in a position to work together to assure that we achieve long-term prosperity for many generations to come. So there is better time for investors to take advantage of the many opportunities created by our strengthening economy," she added.

Senators Loren Legarda and Francis Escudero said there is an urgent need for government to undertake measures to cushion the local economy from the effects of a feared global economic slowdown.

Escudero said the government should immediately look for alternative partners, especially among neighboring Asian countries.

Legarda said despite the rebound posted by Asian stock indexes Wednesday after steep losses in the previous two days, the Philippines should brace itself for continuing concerns over the US economy and its impact on other countries.

"We may be seeing a roller-coaster ride as far as stock markets are concerned," said Legarda, the chair of the economic affairs committee. "There is a need to look at measures to mitigate the effects of a global downturn on us."

Legarda said there may be a need for her committee to gather government economic managers, businessmen, the academe and all other concerned sectors for an in-depth look at global and local economic developments. – Regina Bengco and JP Lopez