Philippine economy slows down, interest rates cut by 0.5%

Special Report:Global Financial Crisis

MANILA, Jan. 29 (Chinese media) -- The Philippines' economic growth slowed down to 4.6 percent in 2008 amid the financial crisis which gripped the economies worldwide, pushing the government to cut the interest rates by 50 basis points the second time within two months.

Last year's growth rate was lower than the 7.2-percent hike posted in 2007 when the economy grew at its fastest pace in more than 30 years.

For the fourth quarter 2008 alone, the gross domestic product (GDP), which measures the value of goods and services produced by an economy, grew by 4.5 percent compared with 6.4 percent in the same period of 2007, the country's National Statistical Coordination Board said in a press release.

Government officials said the figures were better than expected, considering the deepening global crisis.

"Despite the global crisis that persisted in the fourth quarter and that has spilled into the Year of the Ox, the local economy has not atrophied," said Romulo Virola, Secretary General of the National Statistical Coordination Board.

Gross national product grew 6.4 percent in 2008 from 8.0 percent in the previous year.

The government expects the economy to grow between 3.7 and 4.7 percent as the global economic crisis is expected to continue this year.

"As the government implements fiscal and monetary policy to mitigate the impact of the crisis, our economy is expected to remain resilient and prepared for the eventual economic rebound," said Ralph Recto, Socio-economic Planning Secretary of the country.

On the same day, the Philippine central bank BSP decided to reduce its key policy interest rates by 50 basis points, bring the overnight borrowing rate to 5.0 percent and the lending rate to 7.0 percent. The BSP cut the rates by another 50 basis points on Dec.18 last year.

The central bank said that Thursday's decision was based on the outlook that inflation will fall within the target range for 2009 and 2010.

The BSP had set an inflation target of 6 to 8 percent for this year and 3.5 to 5.5 percent for 2010.

"The balance of risks to inflation is tilted to the downside due to the softening prices of commodities, the slowdown in core inflation, significantly lower inflation expectations, and moderating demand," the BSP said in a statement.

Given the improved inflation outlook, "there is room for further easing in the monetary policy stance, which should also provide support to financial markets and the real economy," it added.

"Weak conditions in major economies are weighing down on the country's economic performance through their impact on trade, investment and consumption," said the central bank.

"In this regard, monetary policy easing will complement the fiscal stimulus, which includes accelerated infrastructure spending and targeted social programs," it added.