MANILA, Philippines - Merchandise exports fell an annual 20.7% in December to $3.33 billion, the lowest value in two years, supporting the case for another interest rate cut to boost domestic growth in the face of weak demand for the country's main electronics shipments.

Electronics and semiconductor shipments, which made up 45.6% of export revenues, contracted 32.7% in December from a year ago, the statistics office said on Friday.

For the entire 2011, exports fell 6.86% against a government estimate of a 5% growth, and electronics shipments plunged 23.7%.

"It has been a difficult past year for the Philippines' external sector as weak demand from key markets, especially Western economies, weighed on the key electronics sector," said Radhika Rao, economist at Forecast Pte in Singapore.

"With parts of Europe expected to slip into recession this year and signs of U.S. recovery still lacking momentum, the external sector performance is likely to stay subdued this year," Rao added.

Exports account for about two-fifths of the country's gross domestic product (GDP) based on expenditure terms.

Another economist, Jun Neri of the Bank of the Philippine Islands, said he expects the central bank to implement another rate cut in March to support the economy amid the weak exports figure.

"The December figure is alarmingly weak. We won't be surprised if the Bangko Sentral cuts its policy rate by 50 basis points in its March meeting."

Exports to Japan, the country's top export destination in the month, fell 6.4% in December from a year earlier.

Exports to the United States, the second-biggest market, were down 5.9% from a year earlier.

Shipments to China, the third-biggest market, fell 22.7% from a year ago.

Exports to Eastern Asia -- the top export destination by economic bloc accounting for 48.6% of total shipments -- were down 20.6% from a year earlier. Southeast Asia and the European Union were the second and third top economic blocs.

The Philippines provides about 10% of the world's semiconductor manufacturing services, including for mobile phone chips and micro processors. Semiconductors account for about three-fifths of Philippines' exports.

Other top Philippine exports include garments and accessories, wood furniture, vehicle parts, coconut oil, and tropical fruits.

The economy grew 3.7% in 2011, way below the government's target of 4.5% to 5.5%. Officials said the economy should gain momentum this year and grow 5% to 6% in 2012. - Reuters