##mics have found their target, the third arrow of structural reforms still has to be firmly in place for the economy to successfully transition to self - sustained, deflation - free growth. for china, while the scenario of a hard landing is not high on many economists ’ radar screens, the full implementation of the reform agenda that would help accelerate economic rebalancing toward private consumption and deliver more sustained growth is yet to materialize. third source of volatility impulses is europe. the markets continue to watch what the ecb would actually do to fight deflation and curb the strong euro, whether it would in fact unleash its own version of qe. analysts say super mario isn ’ t “ bluffing ”. there are a number of other impulses, including geopolitical concerns, but in the interest of time, let me just round out this list with this – market differentiation within the eme debt space. differentiation is really the market manifestation of the aforementioned macro impulses. because the current breed of market participants are hard - wired as binary – either risk is “ on ” or “ off ”, market volatility could be amplified depending on which of the earlier impulses would bis central bankers ’ speeches be stronger at a point in time. capital flows could shift from aes to emes, in general, and more strongly into specific emes, in particular. and depending on the news, we may see a rebalancing within the eme space, a return of flows to aes, and the cycle could continue where funds would flow back to emes. eme policy focus : how do we guard against the new wave? amid this “ new wave of volatilities ”, therefore, the key priority of policymakers in emes, including those in asia, should be to continue focusing on promoting macroeconomic stability by strengthening buffers against potential risks to financial stability, and equally to the outlook for inflation and growth. in a word, in the uncertainty created by market reaction to aes, emes must develop an internal anchor. for this, there is no substitute for sound domestic macrofundamentals. our assessment : how would we fare during the new wave? for the philippines, our assessment is that the economy remains well - positioned to deal with these challenges. in the years following the global financial crisis, the confluence of strong economic growth, low and stable inflation, ample liquidity, and broad market confidence has allowed policymakers to

global crisis provides further support to this notion. sweden ’ s growth rate rebounded post - crisis, but should be roughly in line with its average over the previous decade as the global economy recovers in coming years. in south africa ’ s case, the floating currency supported economic growth in the wake of the argentine crisis of 2001, and in the current crisis the economy suffered a quite modest decline in the economy of 1. 7 % in 2009. other factors also played an important role in supporting the economy in this period, including counter - cyclical fiscal policy and sustained high commodity prices. real currency depreciation is, however, only one part of what it takes for economies to weather adverse shocks or to counter domestic economic developments that weaken competitiveness. achieving a new sustainable economic growth rate after a shock or internal adversity requires economic adjustment – changes in rates of return to different economic activities and shifts in labour and capital between those activities. adjustment should be easier to achieve when an economy is reasonably diversified. for south africa, large commodity, manufacturing, financial and services sectors helps to keep the economy going even when one or more of them runs into trouble. this economic diversification is also critical to thinking about where to get the financial means to assist the economic adjustment process. and here an important idea comes from norway, with which south africa shares a commonality in a strong natural resource base. the idea is to shepherd natural resource earnings and use it for long term, inter - generational, development. there are various ways this use of resource rents can be channelled into higher welfare, through direct transfers of income to households, stronger communitarian claims on private sector firms involved in extraction, or through more highly developed public services. but achieving anything via these channels depends on some ground rules being set out and protected in policy, regulation and / or law. one ground rule is the approach taken by the fiscal authorities to set the taxation of the resource rent at a level commensurate with sustainable long - term extraction and the life of the endowment. another ground rule is how to manage the pay out of the revenues accruing from the resource. the benefit to citizens needs to spread over generations, rather than consumed up - front. this implies that public borrowing needs to be carefully managed to ensure that future resource revenues are not committed in advance to debt repayment. a focus on long - run infrastructure development by the public finance authorities could help to ensure that additional borrowing pays back the debt without reducing the