MANILA - The Philippines is likely to avoid falling into recession this year, but drought could be a problem in 2010, a senior economic official said Tuesday.

Rolando Tungpalan, undersecretary of the economic planning department, said President Gloria Arroyo's cabinet has discussed the "threat of possible drought later in the year or early 2010."

"We simply had to flag that to temper expectations. Even as the economy rebounds from the global situation ... there are still threats that may be out of our immediate control."

Agriculture accounts for less than a fifth of the country's economic output, but it employs 35.2% of the labor force.

He said crop diversification and the more efficient use of water using modern irrigation will help limit the impact of a drought.

With economic growth figures for the three months to June set to be released on August 27, Tungpalan said "the bottom line here as has been warned by those critical of our (targets) is that we are totally out of the recession and there are no signs that those who foretell gloom are right."

The government has forecast that gross domestic product will grow 0.8-1.8% this year.

The Philippines economy grew just 0.4% in the first quarter. The World Bank has forecast a contraction of 0.5% this year while the International Monetary Fund estimates shrinkage of 1%.