amando m tetangco, jr : keeping the economy on the right track – key challenges for monetary policy speech by mr amando m tetangco, jr, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the induction ceremony for the new officers of the economic journalists association of the philippines ( ejap ), makati city, 20 february 2015. * * * let me begin by congratulating the new set of officers of ejap, led by its new president, mr. paolo montecillo, who is a member of the bsp press corps. i wish to reaffirm the bsp ’ s belief in the essential role of ejap in promoting high quality economic news reporting in the country. rest assured that your organization will continue to have the support of the bsp in your activities that help achieve the “ responsible and thorough ” coverage of economic events. in the days leading up to the celebration of the chinese new year yesterday, we have been reading and hearing many and varied predictions concerning the year of the sheep or the goat or the ram. tonight, i will contribute my share – from the perspective of emerging market economy central banks, in general, and the bangko sentral ng pilipinas, in particular. the issues that confront eme central banks these days include the following : whether disinflation pressures could lead to breaches in official inflation target bands. whether there is a risk of domestic deflation or whether some collateral damage could be imported from deflation elsewhere. whether there will be further monetary easing ( in the aes in one part of the globe ) or whether there will be a shift in the perception of the timing of monetary tightening ( at the fed, across the other side of the globe ). whether huge dips in oil prices are a positive or a negative. whether we will see currency wars or we will see currency peace. whether new tools would need to emerge to ensure financial stability during this period of divergence in economic trends and monetary policy. there are no absolutes in dealing with these issues. there are many ifs and buts. and, a number of factors and variables, including concerns related to technology and geopolitics, would need to be considered. friends, there is no crystal ball for these things. so, as we continue to navigate a challenging economic landscape this year, it is imperative that the intent of policies from

primarily to monetary and fiscal policies of the industrialized economies that are expected to remain accommodative. emerging market economies including asia are expected to rebound faster and stronger than developed economies. this is because asia ’ s financial sectors were not directly affected by the current crisis. brighter prospect for the global economy next year means our export sector can continue to be our main growth engine going forward. secondly, the government spending under sp2 or the strong thai scheme will also continue to support the nascent recovery. as we are all aware, we cannot indefinitely rely on fiscal stimulus to keep the economy going so it is our hope that public spending will eventually crowd in private demand so that the recovery will continue after the stimulus tapers off. now let me turn to the risks associated with this outlook. despite several good signals, the recovery of the world economy is still subject to a number of downside risks. in particular, the fact that unemployment rates remain high despite the pick - up in economic activities has led many people to worry that this might be a “ jobless recovery ”. this high unemployment, if prolonged, could have a deep and lasting impact on both consumption and the potential growth of the us economy. moreover, consumption in the us will be adversely affected by the decline in household wealth as well as the increase in personal saving rate. other issues which may exert downward force on the world recovery include the high level of public debt which may put upward pressure on long - term interest rates and the us and other advanced countries ’ financial sectors which are still weak and may not be able to support the recovery of the economy. on the domestic front, the downside risk comes from the ability of the government to swiftly execute the sp2 investment projects. in other words, the disbursement may not proceed as expected due to the lack of capacity to effectively implement many projects simultaneously. more importantly, political unrests which affect the stability of the coalition government may distract, disrupt, or in the worst case, discontinue the disbursement process. taking both upside and downside risks into consideration, the bank of thailand ’ s monetary policy committee assessed that the thai economy is expected to recover gradually, supported by better global economic outlook and accommodative monetary and fiscal policies. meanwhile, the inflationary pressure continues to be subdued for the time being. the mpc, therefore, decided to maintain the policy interest rate at 1. 25 percent per year during the most recent meeting