Philippines cuts rate for second time

Manila: The Philippine central bank lowered its benchmark interest rate for the second time in six weeks to help shield the economy from the global recession.

Bangko Sentral ng Pilipinas reduced the rate it pays banks for overnight deposits to 5 per cent from 5.5 per cent, Governor Amando Tetangco said in Manila yesterday

The decision was predicted by nine of 13 economists surveyed by Bloomberg News. The rest expected a quarter-point cut.

New Zealand slashed borrowing costs to a record low today and the US Federal Reserve yesterday left its benchmark rate as low as zero as policy makers grapple with the world economy's worst crisis since the Great Depression. Philippine growth slowed to 4.5 per cent in the fourth quarter from 5 per cent in the previous three months, the government said earlier today.

"It's a question of damage limitation," said George Worthington, chief Asia-Pacific economist at Thomson IFR in Sydney. "The Philippine economy has been relatively insulated but things may become decidedly nastier."

The $144 billion (Dh528.48 billion) Southeast Asian economy expanded 4.6 per cent last year, slowing from a 7.2 per cent gain in 2007. The government in November forecast growth may dwindle to as little as 3.7 per cent this year.

Bangko Sentral has "room for further easing," Tetangco told reporters in a briefing today. Inflation will slow to within the central bank's target this year and next. It's forecasting 3.9 per cent in 2009 and 4.7 per cent in 2010, he said.

Central banks in Thailand, Indonesia, and Malaysia this month cut their benchmark interest rates more than economists expected. Inflation in the Philippines probably cooled for a fifth straight month in January, Tetangco said yesterday.

Exports declined in October and November as demand for Philippine-made Intel Corp computer chips and The Gap Inc clothing fell. Intel Corp, the world's biggest chipmaker, last week said it will close five plants including an assembly and test facility in the Philippines.

The central bank reduced its benchmark interest rate by half a percentage point in December, the first cut since January 2008. Bangko Sentral next meets to set rates on March 5.