* BSP keeps key rate at record low for fourth meeting * C.bank sees 2021, 2022 inflation within target * COVID-19 cases pose ‘substantial downside risk’ (Adds economists’ comments, President Duterte’s directive) MANILA, May 12 (Reuters) - The Philippine central bank left its key interest rate steady at a record low on Wednesday, as policymakers focus on supporting an economy which is showing signs of recovering after shrinking for five consecutive quarters. The Bangko Sentral ng Pilipinas (BSP) kept the rate on the overnight reverse repurchase facility at 2.0% for a fourth consecutive meeting, as predicted by all 13 economists in a Reuters poll. The rates on the overnight deposit and lending facilities were also held steady at 1.5% and 2.5%, respectively. The BSP’s decision comes on the heels of Tuesday’s data showing the economy contracted more than expected in the first quarter, although sequential growth momentum pointed to an emerging recovery. “On balance, the expected path of inflation and downside risks to domestic economic growth warrant keeping monetary policy settings steady,” BSP Governor Benjamin Diokno told a news briefing. Diokno said the risks to the inflation outlook were broadly balanced, with both averages for this year and next seen settling within the 2%-4% target band. The BSP lowered its inflation forecast for this year to 3.9%from 4.2% previously. For 2022, inflation is seen averaging 3.0%, up from the previous forecast of 2.8%. Diokno signalled no change in policy settings anytime soon, saying that “sustained support for domestic demand remains a priority for monetary policy.” Despite elevated inflation mainly driven by tight pork supply, some economists expect the BSP to stand pat for the rest of 2021, while others have not ruled out a further easing. “Provided inflation does begin to fall back later in the year, then rate cuts are likely in the second half of the year,” said Capital Economics’ Asia economist Alex Holmes. The Philippines, which suffered a record 9.6% economic contraction last year, is battling one of Asia’s worst coronavirus outbreaks with more than a million cases recorded and roughly 18,700 deaths. A new surge in COVID-19 cases starting in March had prompted the reimposition of stricter mobility curbs, and Diokno warned that infections “pose substantial downside risk to domestic demand”. On Wednesday, President Rodrigo Duterte ordered all agencies in the executive department to identify savings from their budgets to augment badly-needed funds for the government’s pandemic relief measures. A slow rollout of COVID-19 vaccinations has also raised risks of a more prolonged period of economic weakness. Michael Ricafort, economist at Rizal Commercial Banking Corp, said the local economy “still needs to get all the support measures that it can get amid limited funds for any additional stimulus measures”. (Additional reporting by Enrico Dela Cruz Editing by Shri Navaratnam and Jacqueline Wong)