nestor a espenilla, jr : central bank evolution in the digital age speech by mr nestor a espenilla, jr, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at " perspectives ", organized by citi markets, manila, 8 august 2018. * * * citi philippines cco aftab ahmed, country treasurer paul favila, industry partners, esteemed guests, ladies and gentlemen, good afternoon. last month, the bsp celebrated its 25th anniversary. our theme, “ navigating the future, ” was apt and meaningful in a time of digitalization and technological advancement. your chosen theme for this year ’ s economic forum tells me we are on the same page. indeed, digitalization transforms business models. services must level up to remain relevant and responsive to increasingly demanding needs and to cater to a more sophisticated market. this principle applies also to central banking. the idea that central banks must evolve appears simple. but it is actually quite controversial and fraught with debate. tradition and embracing change the traditional notion is that since central banks are focused on maintaining stability, they must remain conservative. for the cautious mind, the notion of encouraging innovation ( of embracing disruption ) is not only challenging, it may even be threatening. but all around us are drivers that compel us to evolve. we see the fast pace of technological advancement, the increasing interconnectedness of markets, globalization, regionalization and the growing technically - savvy millennial population. these drivers make the case that to stay ahead even central banks ( and not just businesses and firms ) must find novel approaches to address shifts in the economic landscape and to protect developing consumer interests. indeed, old ideas are being challenged. for instance, central banking has historically focused the spotlight on achieving low and stable inflation. monetary and financial stability were conventionally thought of as two separate goals. blinders were almost always worn in the pursuit of one over the other. in a hard and devastating way, the global financial crisis taught us that monetary and financial stability policies are inseparable as financial institutions evolve and as economic activities become more complex. another force that compels us to rethink how we must approach reforms and conduct policy is the advent of the “ fourth industrial revolution ” – the rise of the digital economy. there is now burgeoning awareness that we must leverage on technology to conduct monetary policy and research. there is a present urgency to develop reg

##tech to address fintech developments and their attendant risks. the rise of digitization also forces us to focus on the third pillar of central banking ( which admittedly, has not received as much attention in the past! ). with digitalization and technological disruption, the payment system is now seen as an essential tool for the effective implementation of monetary policy and as a critical infrastructure of a stable and inclusive financial system. these are all exciting prospects. allow me to talk about the bsp ’ s three mandates in this 1 / 5 bis central bankers'speeches context. evolution in the pursuit of price stability the bsp ’ s constant commitment to its primary mandate of price stability has led to managed and stable inflation in an environment of high economic growth. the philippines has achieved uninterrupted growth for the past 77 consecutive quarters despite domestic and global economic challenges. for six consecutive years ( in 2009 to 2014 ), as well as in 2017, inflation settled within the national government ’ s inflation target range. amid this resilience, the philippine economy is being tested by external headwinds emanating from the normalization of monetary policy by advanced economies, and the brewing trade tensions among key economies. these exert depreciation pressure on the peso even as the flexible exchange rate policy continues to be a stabilizing mechanism against unsustainable imbalances. the overall external position of the domestic economy remains resilient. the sustained resilience of foreign direct investments, overseas filipino ( of ) remittances, and business process outsourcing ( bpo ) receipts have provided additional buffers to the domestic economy. our external debt metrics have also improved as exhibited in the continued decline in the external debt to gdp ratio. these external transactions yielded positive results in terms of comfortable gross international reserves of us $ 76. 9 billion as of july 2018, covering 7. 4 months of imports of goods and payments of services and income. in the meantime, the peso continues to reflect day - to - day market conditions. over the last ten years, the peso has generally maintained its external price competitiveness against baskets of currencies of all trading partners and trading partners in advanced and developing economies. on the domestic front, the country ’ s inflation environment is confronted by a confluence of supply - side factors. this posed a challenge as monetary policy instruments more effectively address demand - side driven shocks. this was the case early this year when economic data suggested that an adjustment in