The Bangko Sentral will pace adjustments in borrowing costs to support an economy that?s vulnerable to a deepening global recession, Gov. Amando Tetangco said.

?Going forward, we will pursue prudent rate movements,? Tetangco said in a speech yesterday. ?The recent positive outlook for inflation has provided room, but upside factors such as utility rates and potential price increases in agriculture and fuel have led to a more measured policy action.?

Bangko Sentral has cut its key interest rate 1.25 percentage points to 4.75 percent in the three meetings since mid-December. The government predicts the economy may grow in 2009 at the slowest pace in eight years as the worst global economic slump since the Great Depression hurts demand for Philippine exports and workers.

?The economy remains sensitive to a deeper protracted economic downturn,? Tetangco told a group of financial executives. The central bank ?will remain focused and flexible? because global challenges remain substantial and require ?prompt and decisive policy action,? he said.

Remittances sent home by Filipinos working overseas, equivalent to about 10 percent of the $144-billion economy, may not grow this year after increasing 13.7 percent in 2008, Tetangco said, reiterating an earlier forecast.

The overseas earnings, which help pay for tuition, homes, appliances and mobile phones in the Southeast Asian nation, grew in January at the weakest pace in five years. Slowing remittance growth has contributed to a 2 percent drop in the peso this year.

The central bank doesn?t have a ?strong-peso policy,? Tetangco said. It lets the market determine the rate while it ?smoothens sharp fluctuations,? he said.

The peso yesterday fell to 48.47 to a dollar from 48.345 Tuesday, snapping two days of gains, according to Tullett Prebon Plc.

Bangko Sentral will ?continue to provide incentives for consolidation? among the nation?s banks, which are still better capitalized and more conservative than ?many of the giant, iconic institutions in the West,? Tetangco said. Bloomberg