UPDATE 2-Philippine opts for deeper rate cut to fight virus fallout

* cuts rates by 50 bps to 3.25%

* says ready to use its “full-range” of policy tools

* Coronavirus outbreak to slow growth in the near term (Adds cbank, analyst comments, details)

MANILA, March 19 (Reuters) - The Philippine central bank delivered a larger-than-expected cut in its benchmark interest rate on Thursday and said it was ready to deploy other policy tools as it braces for an economic fallout from the coronavirus outbreak.

The central bank slashed the rate on its overnight reverse repurchase facility by 50 basis points, which was greater that the quarter-point reduction predicted by nine of 13 economists in a Reuters poll.

The Philippines was among the first in the region to take drastic measures to tackle the spread of the respiratory disease, with President Rodrigo Duterte calling it “the fight of our lives”, after deeming existing curbs on movement and gatherings insufficient to quell the contagion.

In less than two weeks, the country’s coronavirus cases climbed to 202 from three, with 17 deaths.

“While the enforcement of quarantine measures could help in slowing the spread of the virus, the resulting disruptions to industries and private spending are likely to reduce economic growth in the near term,” the Bangko Sentral ng Pilipinas (BSP) said in a statement.

The rate cut - the fifth such move by the BSP since it began unwinding policy rate hikes in 2018 - comes as major central banks move aggressively with emergency rate cuts and offers of cheap money to combat the impact from the virus.

The U.S. Federal Reserve on Sunday cut its key rate to near zero in a move reminiscent of the steps taken just over a decade ago in the wake of the global financial crisis.

The U.S. central bank’s decision triggered emergency policy easings by counterparts in New Zealand, Japan and South Korea and Australia to help restore confidence as the health crisis threatened a global recession.

BSP Governor Benjamin Diokno also announced a number of measures to provide banks access to liquidity and boost lending.

Fears the health crisis might prove much more damaging to the global economy than initially anticipated have jolted markets, including the Philippines’ main index which crashed as much as 24% on Thursday, its lowest in more than eight years.

With more than half of the country’s population under strict home quarantine, it is likely that growth this year will slow to zero, said Alex Holmes, economist at Capital Economics.

The central bank has said it is prepared to use its “full range of monetary instruments”, like reducing banks’ required reserves and suspending its term deposit facility auctions to support the economy.

The BSP said this year’s inflation estimate was lowered to 2.2% from 3.0%, close to the bottom end of its 2%-4% target range for this year and next. Next year’s inflation estimate was also trimmed to 2.4%% from 2.9%.

ING economist Nicholas Mapa said the Philippines is facing a “mountain-sized” problem, so apart from a monetary response, the government will need to step in a big way by using all of its fiscal space.

“The wheels of the economy that made the Philippines one of the fastest growing economies in the region have ground to a halt” Mapa said. (Reporting by Karen Lema and Neil Jerome Morales; Editing by Jacqueline Wong and Himani Sarkar)