MANILA, Philippines -- (UPDATE) Filipinos should brace themselves for a ?dry? Christmas this year as the current US economic crisis is expected to spill over here. That's why both government and private sectors should immediately release the Christmas bonuses of all employees, a former budget secretary said on Thursday.

In a media forum, Benjamin Diokno said releasing the Christmas bonuses as early as September would increase the buying power of Filipinos and boost the economy even slightly.

?Dapat i-release na ang Christmas bonus ngayon para sumigla naman ang ating ekonomiya [Christmas bonuses should be released now so that our economy would get a boost],? he said.

Diokno also advised Filipinos not to panic in the midst of the global crisis.

?Our worst enemy is panic. Wag naman tayo magpanic [Let is not panic],? he said.

But Diokno countered claims by the Central Bank that local banks and insurance companies were not affected by the crisis.

?The implication is, if a big bank [like Lehman Brothers] collapses, smaller banks will also collapse. So this means that until the US is unable to recover, the world economy, at least half of the world will be in recession. Until the world is unable to recover, we here in the Philippines cannot expect to have a good economy,? Diokno said in Filipino.

Bangko Sentral ng Pilipinas (BSP) governor Amando Tetangco Jr. allayed fears of a spillover of the global financial crisis, saying local banks are adequately capitalized and the banking industry is in no way facing the possibility of a liquidity crunch.

?The country?s banking industry implemented several reforms in the past years, including in the areas of risk management. Our banks have enough resources to absorb whatever shocks there is in the external environment,? Tetangco said at the Philippine Midyear Economic Briefing, in the Makati business district, Wednesday.

But Diokno said what was needed was for Central Bank to intervene and call on all local banks to report their investments in all US banks.

?The BSP is doing its job and they should require all banks to come forward,? he added.

Three banks -- Metropolitan Bank & Trust Co., Banco de Oro Unibank Inc., and Rizal Commercial Banking Corporation -- have disclosed exposure to the bankrupt Lehman Brothers and were facing possible loss of investments.

Diokno, however, clarified that bank depositors were saved from the effects of the global financial crunch, especially since they were protected by the Philippine Deposit Insurance Corporation (PDIC).

?Actually, hindi yung depositor ang tataamaan kung hindi ang mga investor [it?s not the depositor that would get affected but the investor],? he said.

The main effect on Filipinos, he said, was the economic loss here, particularly the loss of investment that could lead to unemployment and the high prices of commodities. Diokno also belied the latest report by the Department of Finance, which cited a P1.7 billion budget surplus in August.

?Instead of a surplus, there should be a deficit because the government should be using the budget to help the people,? he said.

But Diokno lauded President Gloria Macapagal-Arroyo's statement on Wednesday where she expressed confidence that Filipinos would continue to weather the global economic crisis.

?You have to understand that there is a conflict between the government's position and the position of individual consumers. [For consumers], the problem is that if life is difficult and they have no confidence in the economy, there is a tendency to restrict consumption. And if we don't consume, the economy will further weaken. So the government is now using the element of cheerleading,? he added.

Although the country is far from a recession, or negative economic growth, Diokno said Filipinos should prepare for ?challenging? days ahead as the US economic crisis is expected to last until the end of 2009.
?We have very long and challenging days ahead,? he added.

Diokno suggested, among others, for the government to impose tax reforms and encourage consumption.