maintaining a policy of flexible exchange rates ; 2. to build a strong financial system that is flexible in the face of global competition and innovation ; in particular, we will continue to ensure that the banking system is adequately capitalized, well - governed, profitable and efficiently managing its risks. let me end by answering the question, can the country ’ s economic gains be sustained? the answer is yes. our macroeconomic fundamentals are sound. we have undertaken significant macroeconomic, fiscal, banking and financial sector reforms which make the economy more resilient to domestic and global uncertainties. we are mindful though that there are risks to this outlook. thus, even as our assessments show that the risks are manageable and moderating, we continue to monitor these carefully. going forward, the challenge lies in continuing the reform process to sustain the growth momentum and improve the country ’ s competitiveness. i continue to look to all of you, our partners in this endeavor, for your support as we move this country forward. thank you very much.

a reduction in policy rates. the continued appreciation of the peso, meanwhile, provides a buffer against rising global commodity prices, including food and oil. the move can also be expected to help support domestic demand, increase lending to productive activities, and shield the economy from any potential slowdown in global output growth that could occur as a result of the correction in the global financial markets. earlier moves by the bsp were also geared toward coping with the surges in capital inflows as well as easing the pressure on the exchange rate. these included the liberalization of the foreign exchange regulations to allow the markets greater access to foreign exchange for outward investment and over - the - counter transactions. b. financial sector reform with regards the second global force, that of the changes in the nature of financial risk, we believe that our suite of banking and financial sector reforms would equip the banking system to better appreciate, monitor and mitigate risks. among the most critical of these, are : 1. the continued drive towards speedy asset clean - up ; 2. the implementation of the basel ii capital adequacy framework, with the steady enhancements from the standardized approach to the use of internal models ; 3. the adoption of international accounting standards ; 4. the enhancement of corporate governance structures, particularly in developing oversight capacity of the board of directors to promote proper risk management environment ; 5. the enhancement of the transparency of the system through improved disclosure requirements ; 6. the implementation of risk - based supervision and continuous capacity building. we will also continue to support the development of the financial markets, including the derivatives market, and we will be unwavering in our push for legislative reforms, particularly the credit information system. an important lesson that could be learned from recent crises, including the risk aversion that resulted from the subprime mortgage fall out in the us, is that in order to minimize contagion, transparency is a key principle. when markets become frantic and fear dominates, the absence of transparency could foster a herd behavior and could considerably magnify the initial impact of the disturbance. vi. conclusion i have only briefly touched upon two of the risks that challenge the sustainability of our economic gains. to address these as well as the other challenges we face, the bsp ’ s policy thrusts will remain as follows : 1. to nurture a resilient economy by ensuring this is anchored on sound macroeconomic fundamentals ; in particular, we will stay focused on achieving our inflation target while