MANILA, Philippines?(UPDATE 2)The country?s economy is "teetering toward a recession" with first quarter output pegged at 0.4 percent due to the global financial crisis, the National Statistical Coordination Board said on Thursday.

Seasonally adjusted, the gross domestic product for the first quarter contracted by 2.3 percent, the country?s lowest in 20 years.

"The threat of recession is all too real," NSCB Secretary General Romulo Virola said in a briefing early Thursday.

"Historic declines in manufacturing and trade sent the economy into hiccups," added Virola, senior official of the economic planning ministry.

Industrial output fell 2.1 percent.

"The Philippine economy is now teetering into recession," he said.

He said the expected growth of 0.4 percent for the whole year is far below government's earlier revised forecast of up to 4.0 percent.

Socio-economic Planning Secretary Ralph Recto, for his part, said the government was now less confident of meeting a 2009 growth target of 3.1-4.1 percent, but did not give details.

He however said he expected the economy "to stay afloat" during the year.

Recto suggested an easier monetary policy will help support growth in the Philippine economy.

"Loosening monetary policy will help clearly," Recto told reporters.

The Philippine central bank will hold a policy meeting later on Thursday and the market expects a cut of at least 25 basis points to 4.25 percent for the overnight borrowing rate, a fresh 17-year low.

The policy announcement is expected shortly after 0800 GMT.