amando m tetangco, jr : sustaining growth while riding the uncertainty speech by mr amando m tetangco, jr, governor of bangko sentral ng pilipinas ( the central bank of the philippines ), at the bloomberg ’ s foreign exchange forum, makati, 13 august 2014. * * * introduction – caution in a time of uncertainty good afternoon. seeing all of you here once again validates my theory that indeed there is a strong correlation between volatility and attendance in a forum like this one – to listen to the central bank talk about uncertainty. from a smaller function room downstairs where we used to hold this forum, we have been kicked upstairs to this ballroom. holding this discussion now also shows bloomberg ’ s knack for getting the timing right. your interest confirms that the most common reaction to uncertainty is caution. think about it, if you are about to undergo your annual physical, don ’ t you modify your eating habits and hold off on that last piece of “ lechon ”? however, how long you feel you need to deprive yourself depends on your “ initial conditions ”. if you are in fairly good health, maybe you would only skip one craving for that savory bite and you would still be confident to walk into the doctor ’ s office. the same reality applies to the financial market. 1 ) when market participants sense uncertainty, they proceed with caution and 2 ) the impact of uncertainty on your behavior will depend on initial conditions. if uncertainty finds you at a time of high market volatility, you are likely to be more nimble, than when uncertainty finds you at a time of low volatility. right now we are in a low volatility environment. some analysts say volatility is “ eerily ” low. there is even an assessment that markets have become “ too ” complacent. is that the case among market participants in the philippines? i hope not. see, the thing with “ uncertainty ” is that the degree of uncertainty is itself uncertain. therefore, we really cannot, and should not be complacent. because however quiet markets seem to be now, risks remain. risks remain what are these risks that we face today? let me name four that are top of mind : 1 ) monetary policy normalization in advanced economies. the consensus, as i understand it, is that the fed would continue with its current pace of tapering. the operative question now therefore is when will

effectively. on external liquidity dynamics – we will retain a pragmatic approach to handling foreign exchange so that our current account continues to be in surplus, supported by overseas filipino remittances, business process outsourcing ( bpo ) revenues, tourism receipts and exports. we will also manage international reserves as appropriate. our strong external liquidity position will continue to provide a cushion against external shocks. all these would help enable the philippines to remain competitive and be able to hurdle the challenges as well as reap the benefits from the numerous opportunities of the forthcoming asean integration of financial and goods markets. granted, much more needs to be done to make the asean story “ whole ”, we find the initial conditions and our policy thrusts conducive to make this story come true. assessment : given such sound initial macroeconomic conditions, should we / you worry? would any uncertainty rock us / you? and the million dollar question – what can you expect from the bsp? a tilting in any / or all of the risks i enumerated could tip the balance of volatility from low to high. for certain, the sound macro conditions we walked through earlier would help to temper the impact of a significant and sudden shift to greater volatility. but, how each of your individual bottom lines would ultimately be affected would depend on your specific circumstances. clearly, the philippines is in a good spot, and the prospects are bright. our sound fundamental story is intact. this should not, however, lull us to complacency. i admonish each of you to use this time of low volatility wisely – take stock of your positions and carefully reassess these against the risks. it is a fundamental truth – in everything we face, there are two circles of concern that confront us : 1 ) those concerns that are within your control, and 2 ) those outside of your control. quite often, the latter circle is larger than the former. as market practitioners, you need to be mindful of these two circles. what can you control? certainly your risk appetite. controlling this when greed gets the better of you is very difficult. so in a period of low volatility such as what we have been experiencing, practice the discipline of setting limits. this discipline will not only help you to avoid the pitfalls of “ chasing the market ”. more importantly, this discipline will help you take advantage of the obvious opportunities, as well as unearth those that are