own sake but because this lays down the conditions for sustainable and balanced growth. bis central bankers ’ speeches at the same time, prudent fiscal management has enabled the ng to keep the fiscal deficit within target and on track with fiscal objectives. 1 the ng has gained fiscal space that could be utilized to boost the economy, when necessary. in addition, the bsp has also enhanced its policy toolkit to include macroprudential measures that would address the financial stability pressures of external factors such as capital flows. the bsp will continue to maintain a flexible exchange rate policy that allows the market essentially to determine the exchange rate, but with scope for official action to ensure against excessive volatilities. we have also been actively pursuing banking sector reforms that will enhance the soundness of the system, engender healthy domestic competition while enabling our banks to level up against peers in the region. alongside beefing up the banking sector, we will continue to broaden our efforts at financial literacy and inclusion. conclusion : while the country is exposed to global headwinds, and some domestic storm surges, we are focused on our price and financial stability mandates. in the presence of global headwinds, we have the tools that would allow us to capitalize on domestic tailwinds. warren buffet once said, “ you only find out who is swimming naked when the tide goes out ”. well, ladies and gentlemen, i am confident that when the tide does go out, the philippines will be found well - clothed. jan – sept 2013 programmed deficit is p144. 5b vs. actual deficit of p101. 2b. bis central bankers ’ speeches

is not too hot, or too cold. where the bed is neither too hard nor too soft. where the chair is not too big or not too small? are there other risks that lurk? how do we intend to respond to these? would we be surprised like goldilocks was when the bear family arrived and found goldilocks sleeping in one of the beds? then came the storm … in a way, yolanda can be considered as a “ surprise ” that hit us. regions 6, 7, and 8 account for about 12. 7 pct of 2012 gdp. latest estimates from the ndrrmc, put damage to property, industry and agriculture in these regions at p24. 5b ( as of 26 nov 2013 ). what is the impact of yolanda on domestic growth? on domestic inflation? current assessments show that the impact on overall gdp in 2013 would be manageable. the expected expenditures for relief, rehab and reconstruction should help keep gdp in 2013 and 2014 within the ng target. inflation, on the other hand, will likely increase in november and december from the october level of 2. 9 pct. but given that the weight of the affected regions in the national cpi is relatively small, the impact of the regional price increases over the two month period on the bis central bankers ’ speeches overall inflation in 2013 should also not be that significant. over the balance of the policy horizon, inflation is expected to stay around the middle of the target range. risks remain … before yolanda, bsp had been keeping a close watch on the spillover effects of global developments. specifically, 1 ) rapid domestic liquidity growth, 2 ) strong domestic credit growth ; and 3 ) potential asset bubbles. i am often asked the questions – is the bsp not worried about strong liquidity growth, which tipped 30 percent in august and september? is the bsp not concerned with credit growth, which has been growing at double digit for over a year now? does the bsp see an asset bubble? let me consider each briefly. on liquidity growth – the uptick in liquidity growth will only be for a short transition period, as banks adjust to operational refinements to the access to the bsp ’ s sda facility. with banks rebalancing portfolios to take these changes into consideration, banks could be expected to more expeditiously and effectively channel the sda funds to the productive sectors. on credit growth – in our assessment, the banks