benjamin e diokno : the philippine economy post - covid - 19 moving steadily towards recovery speech by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the philippine economic briefing 2022, manila, 30 january 2022. * * * good day, everyone. i hope you are all safe and well. thank you to daiwa securities group for allowing me to share updates on the economy and how we plan to maintain our strong growth momentum. i am pleased to present to you latest developments in the philippine economy. after five consecutive quarters of negative growth, the philippine economy maintained its positive momentum and grew 7. 7 percent in the fourth quarter of 2021. this brings the full - year gdp growth figure to 5. 6 percent. the full - year print exceeds the government ’ s revised forecast range of 5 to 5. 5 percent, giving us even more confidence of even brighter recovery prospects. labor conditions have improved. in november 2021, the country ’ s unemployment rate, down from a peak of 17. 6 percent in april last year, fell even further to 6. 5 percent, the lowest since january 2021. employment gains for the month have occurred mainly in the services sectors, particularly in public administration and defense, as well as wholesale / retail trade ; and in fishing and aquaculture. meanwhile, the country ’ s year - on - year headline inflation further decelerated to 3. 6 percent in december 2021 from 4. 2 percent in november 2021, bringing the year - to - date average inflation to 4. 5 percent. this is slightly above the government ’ s inflation target range of 2. 0 - 4. 0 percent for 2021. the slowdown in december 2021 inflation supports the bsp ’ s assessment that inflation would decelerate to within the target range over the policy horizon. meanwhile, the development budget coordination committee ( dbcc ) decided to retain the current inflation target range at 3. 0 percent ± 1. 0 percentage point for 2022 – 2024. the prevailing policy stance is also supported by a manageable inflation outlook and anchored inflation expectations. based on our latest baseline forecasts, inflation is seen to settle at 3. 4 percent in 2022 and 3. 2 percent in 2023, well within the government ’ s target range of 2 to 4 percent. we expect liquidity in the financial system to remain adequate in supporting credit activity and a broad - based economic

recovery. m3 expanded by 8. 2 percent year - on - year to p14. 8 trillion in november 2021, unchanged from the growth rate ( revised ) recorded in october 2021. overall liquidity conditions thus continue to provide support for domestic economic activity. the various liquidity - easing measures of bsp have injected the equivalent of 12. 0 percent of gdp into the financial system. meanwhile, outstanding loans of universal and commercial banks ( u / kbs ), net of reverse repurchase ( rrp ) placements with the bsp, increased at a faster rate of 4. 0 percent year - onyear in november 2021 from 3. 5 percent in october 2021. moving on to banking sector developments … 1 / 4 bis central bankers'speeches philippine banks have shown resilience to the covid - 19 crisis, benefiting from risk - management and other regulatory reforms of the past two decades. banks have ample buffers against shocks. capital adequacy ratio ( car ) is at 17. 6 percent, well above the 8. 0 percent prescribed by the bank for international settlements ( bis ) and the bsp ’ s 10. 0 percent minimum requirement. exposure to bad debts remains manageable. average non - performing loans ( npl ) ratio stood at 3. 9 percent as of end - november this year, much lower than the double - digit figures in the aftermath of the asian financial crisis. the implementation of the fist act, signed earlier this year, is projected to reduce average npl ratio of the banking system by 0. 6 to 5. 8 percentage points for the years 2021 to 2025. the exchange rate movements remain broadly in line with the country ’ s long - run macroeconomic fundamentals. in 2021, the foreign exchange market was supported mainly by positive market sentiment as the economy continued to show signs of recovery amid the pandemic. the bsp has held to its long - standing approach of keeping the exchange rate market - determined and taking measures only to ensure orderly market conditions and reduce excessive short - term volatility in the exchange rate that may impact on inflation and inflation expectations. looking ahead in the year, the peso is expected to remain stable, supported by structural inflows from exports, overseas filipino remittances, bpo receipts, and foreign direct investments. meanwhile, the country ’ s external sector continues to provide sufficient buffers to ward off the potential adverse effects of external headwinds. our gross international reserves ( gi