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The Philippine central bank may cut its benchmark interest rate to a 17-year low to prop up an economy battered by falling exports amid the global recession.

Bangko Sentral ng Pilipinas will lower the rate it pays lenders for overnight deposits a quarter of a percentage point to 4.5 percent, according to 10 of 12 economists in a Bloomberg News survey. One expects a half-point cut and the other predicts no change. The decision is due after 4 p.m. in Manila today.

The government today trimmed its 2009 growth forecast to the slowest in eight years as shipments by manufacturers such as Texas Instruments Inc. tumble. Inflation has halved from a 16- year high of 12.4 percent in August, allowing the central bank to cut borrowing costs in the past three meetings.

“The central bank will continue to ease and probably step up the rate cuts by mid-year once inflation has dropped significantly,” said Simon Wong, an economist at Standard Chartered Plc in Hong Kong. “With trade collapsing and remittances expected to turn negative soon, the economy is headed for a sharp slowdown in 2009.”

The peso rose 0.3 percent to 47.655 per dollar as of 12:37 p.m. in Manila, according to Tullett Prebon Plc, on optimism a rate cut will help support economic growth.

Exports in February shrank 39.1 percent from a year earlier, declining for a fifth month, the statistics office said in Manila today. Overseas sales, which make up about 38 percent of the economy, plunged a record 40.6 percent in January, according to Bloomberg data going back to 1981.

Economic Targets

Remittances, or funds sent home by Filipinos working overseas, may not grow this year, the central bank has said. The inflows are equivalent to more than 10 percent of the $144 billion economy.

Economic managers cut the 2009 gross domestic product growth target to a range of 3 emergency cash loans.1 percent to 4.1 percent from the previous estimate of 3.7 percent to 4.4 percent, Budget Undersecretary Laura Pascua said in Manila today.

The government also trimmed predictions for exports and widened the budget-deficit forecast to as much as 199.2 billion pesos ($4.2 billion) from the previous 177.2 billion-peso ceiling, she said. The state’s planned 2009 domestic debt sales will increase to 463.1 billion pesos to fund the shortfall, Finance Undersecretary Gil Beltran said.

Asian policy makers have unveiled stimulus packages worth more than $950 billion and lowered borrowing costs to revive growth as the global slump pushed Japan, Singapore and Taiwan into recession.

Flexibility

Neighboring Indonesia earlier this month reduced its benchmark interest rate to 7.5 percent and said it has scope to ease policy further. Thailand last week reduced borrowing costs to 1.25 percent, the lowest level since July 2004.

The Philippine central bank “has some flexibility in its monetary policy to ensure that financial markets function efficiently so as to create an environment where economic growth is not derailed,” Governor Amando Tetangco said this month.

Lower borrowing costs are enabling SM Investments Corp., owner of the nation’s biggest retailer and largest lender by assets, and San Miguel Brewery Inc. to raise funds amid the global credit crunch that escalated last year after Lehman Brothers Holdings Inc. filed for bankruptcy.

Bangko Sentral has cut its key rate by 1.25 percentage points since mid-December to 4.75 percent. A reduction to 4.5 percent would be the lowest since 4.125 percent in May 1992, according to central bank data.

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