MANILA, Philippines ? The United States is facing possible recession, the dollar continues to weaken against major world currencies, and political upheavals are hovering all over Asia. On the local front, the communist insurgency is still raging, the secessionist movement is still taking its toll on Mindanao, posturings for the 2010 presidential elections have begun, and the purchasing power of overseas Filipino workers has been painfully eroded due to the foundering dollar.

All these seem to make for a dire prognosis, and yet strangely enough, experts generally see a good, bountiful year ahead for the Philippines.

The US-based credit rating firm Standard and Poor's, in a report issued late October, said that the Philippine economy, as measured by Gross Domestic Product (GDP), should expand by 6.5 to 7 percent this year, about the same as or just slightly lower than last year's estimated growth.

?With the expected continuation of political and macroeconomic stability and increased public spending, growth should remain high at 6.5 to 7 percent in 2008,? S&P said.

In the second quarter last year, the Philippines recorded a GDP growth of 7.5 percent, the highest in 20 years, and set the stage for renewed optimism in the Philippines' prospects.

There is a consensus that the economy may not grow as much this year as in 2007, because last year's growth was quite high and thus would be difficult to match. But then again, a forecast that the growth would not fall too far behind last year's is certainly not something to sneeze at.

The World Bank (WB) expressed a similar bullish sentiment.

In its most recent report on East Asia and Pacific, considered the world's fastest growing region, the WB said the Philippines' economy should expand by 6.2 percent. This updated report reflects a slight improvement over its previous forecast of just 6 percent for the year, and puts the Philippines ahead of Malaysia and Thailand, which were expected to grow by 5.9 percent and 4.6 percent, respectively, this year.

?The Philippines has demonstrated its ability to perform at par with or better than its regional neighbors on the economic front in recent years,? notes Maryse Gautier, acting country director for the World Bank. ?The challenge moving forward is to accelerate the pace of reducing poverty, delivering social services to the poor, and attracting job-creating investments.?

The WB based its rosy view of the Philippines on the reduction of public debt and balance-of-payments surpluses in recent years, which means there are more dollars coming into the country than going out. This is due largely to the over $14 billion in OFW remittances coming into the country, and robust exports.

With the economy expected to grow at about 7 percent, Citiseconline.com, the country's largest online stock brokerage firm, expects the Philippine Stock Exchange index to hit as high as 4,200 by the middle of the year, an upgrade from its earlier forecast of 3,840 due to low interest rates and the money flowing into the country.

Citiseconline said in a recent briefing that money was flowing into the stock market because of low interest rates, which means that investors' money in traditional savings and time deposit accounts is not yielding as much as it used to. In the search for alternative investment instruments, the money usually ends up in the stock market or even in currencies.

Strategists at Standard Chartered Bank even told clients recently that investors should buy the Philippine peso because of its strength over other currencies. ?Strong inflows, attractive valuations and the authorities, tolerance for gradual currency strength continue to provide fundamental support for the peso,? analysts Thomas Harr and David Mann said in a note to clients.

The peso was the best-performing currency last year, gaining some 19 percent over the US dollar in 1997. Recently, the peso breached the 41:$1 level, to reach its highest level in eight years. The Standard Chartered analysts say the peso could rise even further as ?the economy should be helped by rising consumption and its limited exposure to a US slowdown.?

Former socioeconomic planning secretary Dr. Cayetano W. Paderanga Jr. notes in a paper that the Philippines is no longer as dependent on the US as it used to be, because it has found alternative markets in China and India. As such, he expects the economy to grow at a faster rate of 7.1 percent this year from about 6.7 percent last year.

Paderanga adds that another reason for optimism is the growth in the services sector, one of the biggest contributors to the economic growth in 2007. This includes the booming call center and business process outsourcing industries. He likewise expects the real estate and industry sectors to grow this year on the back of continued OFW remittances and low interest rates that are making it easy for buyers to get a loan to finance their purchase.

There are factors, however, that may just spoil the party for the Philippines.

Paderanga says one of the biggest questions is the ability of the government to meet its revenue collection targets to ensure that it has enough money to provide vital social services.

And then, of course, there's the United States, the world's biggest economy. While the Philippines is no longer as vulnerable as it used to be, it is still not immune to the ills hounding the country's main source of investments.

The fact still remains. The Philippines may not get pneumonia when the United States sneezes, but it could still catch a nasty cold.