benjamin e diokno : staying on track in 2020 - sustaining positive ph growth inflation dynamics speech by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the manila times 11th business forum, makati city, 3 march 2020. * * * the manila times president and ceo, mr. dante ang ii, my co - speakers and colleagues in the government service ; distinguished speakers from the business community as well as the world bank ; ladies and gentlemen, good morning. it is a pleasure to be joining today ’ s business forum to share the bsp ’ s views on the macroeconomic developments and prospects for the philippine economy at a time when the domestic economy is seeing both low inflation and robust economic growth. in line with the conference theme and given that the other economic team members are here – allow me to share my insights on the economy ’ s outlook for the year from the perspective of a central banker. high and volatile inflation is undesirable because it leads to slower real economic growth and lower social welfare for most filipinos, especially the poor. until recently, the philippines is characterized as high inflation and low growth. in 2002, onward this trend was reversed. this development happened when bsp adopted the inflation targeting framework. in recent years, we are seeing the generally sustained positive alignment of strong growth and low inflation which is what is needed to ensure that the economy can continue growing without having to worry about overheating. the bsp, being the country ’ s central monetary policy authority with the core mandate of promoting price stability, is committed to ensure that this noninflation growth is sustained. manageable inflation along with expectations of within - target inflation over the policy horizon is expected to boost consumption demand, which has been consistently one of the key growth drivers of the domestic economy. in 2019, headline inflation eased significantly, averaging 2. 5 percent, lower than the 5. 2 percent inflation in 2018. the deceleration was largely driven by slower price increases of rice and other selected food and energy items. food inflation dropped to 1. 8 percent year - on - year in 2019 from 6. 6 percent in 2018 due to improving supply conditions. rice prices declined in 2019 largely due to the rice tariffication law and the continued arrival of rice imports. at the same time, inflation rates for meat, fish, oils, and fats, vegetables, as well as sweeteners

– the work of the central bank in strengthening financial stability. although it does not have an explicit statutory financial stability objective, maintaining the safety and soundness of the financial system is a long standing responsibility of the bank. ladies and gentlemen, the central bank takes its sacred responsibility for financial stability in trinidad and tobago very seriously and is working assiduously to reduce the possibility of future financial crises, and to limit the consequences if they do occur. i wish to remind the national community that this mandate of the central bank goes beyond the medium term horizon of the next parliamentary electoral cycle. we are guided, as an independent institution with national responsibility, by the long - term economic interests of the people and the state of trinidad and tobago. as the country ’ s prime financial regulatory and supervisory authority, i give you the assurance that the central bank is prepared to take early and decisive corrective actions to prevent a build - up of unmitigated risks in individual financial institutions, or in the financial system as a whole. there are several ways in which the central bank promotes financial stability. one is laying the foundation for low and stable inflation. another is helping to facilitate economic growth. perhaps the most direct way in which the central bank promotes financial stability is through regulation and supervision. on the regulatory front, modernization of the laws pertaining to the financial services industry is taking place. we are focusing on the most important and urgent problems first. on the supervisory front, the central bank is strengthening its capacity. i now want to provide some details on key initiatives. following clico ’ s failure, the central bank has made considerable progress in strengthening the regulatory framework for insurance. the current insurance act dates back to 1980 and is not designed to adequately address the types of risks that are inherent in the current suite of products and services provided by insurers today. a new insurance bill has been drafted following extensive consultations with the industry and is waiting to be laid in parliament, which is expected to re - open this month. bis central bankers ’ speeches the proposed insurance bill contains a modern approach to insurance regulation and supervision, strengthening corporate governance of insurance companies, and establishing more effective protection of policyholders. it will address fundamental prudential deficiencies and will include the following important requirements for insurance companies which are consistent with international best practice : • implementation of a new actuarial valuation methodology ; • implementation of a risk – based capital regime ; and • implementation of a stress testing regime. like the insurance industry, the credit union