MANILA, Philippines?Malacañang Sunday urged the public to prepare for a ?worst-case scenario? amid the steady negative impact of the US financial crisis on stock markets elsewhere in the world.

Press Secretary Jesus Dureza said the country would not be insulated from the global financial crunch despite its sound economic fundamentals, particularly in the banking system.

?We have to be ready for a worst-case scenario because whatever we say, our country is part of a global village,? Dureza said in an interview over Radyo ng Bayan. ?We will be affected in one way or another so we should be ready for it.?

But a former financial adviser of President Gloria Macapagal-Arroyo warned that the much-feared collapse of the country?s own financial system could only happen because of ?our own doing.?

?Confidence is the best defense in a market like this,? Corazon Guidote, former presidential consultant for investor relations, Sunday told the Philippine Daily Inquirer in a phone interview. ?The best way is to stay calm and ride the storm.?

Guidote had served in the Arroyo administration for four years before quitting ahead of the ?Hyatt 10? Cabinet members to return to the private sector in 2005.

She had spent 13 years in the stock-brokering business, working with several multinational companies before joining Malacañang and setting up the office for investor relations.

Slowdown

Augusto Santos, deputy director general of the National Economic and Development Authority, said the Philippine economy might slow down amid the global financial crisis but there was no chance of a crash.

Santos appealed for calm as he predicted workers could still get their bonuses this Christmas.

?There is really no cause for panic,? Santos said on local ANC television. ?The moment that the people panic, that will make the situation worse.?

?We will still have positive economic growth. It will contract but it will not go negative,? he said.

Contingency plan

Santos said the government was working on a contingency plan for overseas-based Filipino workers who may be affected by the global financial crisis.

The Philippine economy has for years relied on the country?s estimated eight million workers abroad sending money home.

Last week, economic experts said the Philippine economic growth would likely fall to 4.3 percent this year and 4.2 percent in 2009. The Philippine economy grew 7.2 percent last year, the highest in 30 years, the government said.

Learn from mistakes

Guidote said the public should learn from the mistakes of other economies outside of the United States that were also suffering from a steady decline in the stock market.

She said much of the problem was a result of what she called ?I heard? instinct.

?Panic in the market creates rumors,? she said. ?It triggers stampede which is what?s happening in the US and Europe now. The emotional contagion which began in the US is now spreading like wildfire across the globe.?

Guidote feared that if panic hit the Philippines, ?the government cannot bail us out because we have no resources.?

Fundamentally sound

She said the local banking system was fundamentally sound as a result of adjustments made following the Asian financial crisis in 1997. But still, she said it would not survive a bank run triggered by sheer depositor panic.

?If that happens, it will be a self-inflicted wound,? she said. ?We will do damage to our own banking system.?

Guidote echoed the good news that the exposure of several local banks in the US stock market was limited and could easily be written off.

?(Mass) withdrawals are the last thing that we should do because they will hurt our banking system,? she said. ?Confidence in our own banking sector is critical.?

Dureza downplayed the effect of the financial crunch in the United States on Filipinos working there, noting that many of them were serving in the fields of education and health, which were still largely insulated from the crisis.

?Our workers in the United States will not be as badly hit ? but we should be ready,? he said.

Guidote said overseas Filipino workers and their remittances were providing a ?cushion? for the Philippine economy in the wake of the global financial crisis. With a report from Agence France-Presse