system by lowering financial intermediation costs. fifth, another key contributor to the 2019 growth performance was the improving external sector position of the country amid narrower trade deficit. the external sector remains a pillar of strength for the economy given the recorded surpluses in the balance of payments ( bop ), along with a lower current account deficit in the first three quarters of 2019. the bop position made a turnaround — from a deficit of us $ 2. 3 billion in 2018, to a surplus of us $ 7. 84 billion in 2019. the reversal was due to higher net receipts of trade in services, personal remittance inflows from overseas filipinos, and sustained net inflows of foreign direct investments and portfolio investments. at the same time, the current account deficit for the first nine months of 2019 shows narrower deficit of us $ 992 million from us $ 5. 8 billion in the same period in 2018. this was largely a result of the lower trade in goods deficit, combined with higher net receipts in the trade in services, and in the primary and secondary income accounts. sixth, the current account deficit is manageable and financeable. a current account deficit is not necessarily a negative for the economy. an economy growing at an average of 6. 5 percent annually in the past eight years, like the philippines, needs to import capital goods and services to expand its absorptive capacity and avoid overheating of the economy. as the government commits to accelerate infrastructure - focused investments, the increased 3 / 5 bis central bankers'speeches importation of capital goods, raw materials, and intermediate goods follow. also, the country ’ s current account deficit is manageable and financeable given the sustained structural sources of foreign exchange inflows in the economy. these include overseas filipino remittances, bpo revenues and tourist receipts, as well as net inflows of both foreign direct investments ( fdis ) and foreign portfolio investments ( fpis ). as of end 2019, the country ’ s gross international reserves ( gir ) reached us $ 87. 9 billion — equivalent to 7. 7 months ’ worth of imports of goods and services and payments of primary income. this is more than twice the traditional metric used to determine reserves adequacy, that is, equivalent of 3 months worth of imports. the sustained favorable external debt profile, demonstrated by the continued easing of the country ’ s external debt to gdp ratio, supports the external sector position. the country ’ s

back to the second half of 2006. at that time, firms and people around the world held a wide array of financial assets that were ultimately backed by u. s. residential land. they viewed those assets as being largely risk - free. investors may have understood that a fall in the value of u. s. land would impose large losses on them. however, they put low odds on such a decline taking place. rather, they seemed to believe that u. s. land prices would continue to rise at a steady clip, as they had over the preceding 10 years. by the second half of 2007, that belief began to unravel in the face of incoming data. people were learning the hard way that u. s. land was a risky investment. now the only question was how risky. that uncertainty planted the seeds for global financial panic. what do i mean by the term “ financial panic ”? financial panics are events that blur the line between liquidity and solvency. a firm is solvent if its revenues ( in a discounted presentvalue sense ) exceed its expenditures. a firm is liquid if it is able to raise enough funds – either by borrowing or by selling assets – to pay its current costs. in a financial market that is functioning well, solvent firms are typically liquid because they can borrow against their future profits. during a financial panic, however, lenders feel unable to assess the future profits and / or collateral of borrowers. borrowing becomes highly constrained, credit markets cease to function as well, and even highly solvent firms may become illiquid. as i ’ ve said, many forms of collateral around the world were either implicitly or explicitly backed by u. s. residential land in the mid - 2000s. but by mid - 2007, as those land prices fell, financial markets became increasingly uncertain about how to evaluate mortgage - backed securities and other assets backed by u. s. land. that translated into uncertainty about the ultimate solvency of institutions holding those assets – and then about the ultimate solvency of any of their creditors. spreads in credit markets between treasury returns and other bond returns began to widen – at first slightly and then alarmingly as the panic conditions took firmer hold. most economists agree that central banks should respond to financial panics by communicating that they are willing to lend freely to solvent firms, against a wide range of good collateral, at some kind of penalty rate. this policy is useful for two reasons. first, it provides a source