amando m tetangco, jr : trust reforms – positioning the business for growth speech by mr amando m tetangco, jr, governor of the central bank of the philippines ( bangko sentral ng pilipinas ), at the first general membership meeting of the trust officers association of the philippines ( toap ) for the year 2007, manila, 30 march 2007. * * * distinguished directors and members of the trust officers association of the philippines ; fellow bankers, special guests, friends. good evening. the invitation of toap president ma. lourdes de vera declared that you are adopting the hawaiian theme tonight. i was also advised that if i chose to come in my usual business attire, i will be given a lei. naturally, i became curious. i remembered this wise woman who said : when a man brings his wife flowers for no reason, … there ’ s a reason. tonight, you chose to bring the full bloom of flowers to this ballroom. clearly, this is a celebration! well …, if the practitioners in our trust and fund management industry are celebrating, then we at the bangko sentral are here to congratulate you. toap has been … and continues to be … a dependable partner of the bangko sentral in promoting the development of our financial system … and in upgrading the quality and variety of financial services to the public. this is the reason why i readily accepted your invitation for me to join you in your first general membership meeting this year. in particular, i appreciate the fact that our trust practitioners specifically requested that i discuss banking reforms as they relate to the trust industry. but first, i shall give you an overview, so that you can appreciate the context of our reform agenda. economic prospects and financial stability we are all witnessing a markedly more positive sentiment on our economy as manifested in higher investment flows from abroad into both direct equity and portfolio securities. not surprisingly, domestic investor activity has likewise perked up. these developments have re - energized our domestic financial markets. to a major extent, the phenomenon is being driven by global liquidity conditions, relatively benign global capital markets and generally stable world economic conditions. these factors have made international investors more willing to look at a broader array of investment opportunities, outside of the traditional favorites. but it is also true that smart money does not get into markets if the fundamentals are not right. so, what are the positive things that investors are seeing in the philippines today? well,

updates on the monetary, external and banking sectors and our outlook for these sectors, but it also allows for an exchange of ideas, where feedback is welcome, and critical questions can be asked, providing us with additional input when we consider our reform initiatives and policy decisions. i have read that to find equilibrium between continuity and change one must : first have a deep understanding of the operating context ; second take a holistic approach, and third, for success and sustainability of policies, work with all facets of the environment. i will present my message following this outline. first, the operating context the philippines is recognized among one of the fastest growing and most resilient economies in 1 / 5 bis central bankers'speeches the region and the world, enjoying a sweet spot of high growth and manageable inflation complemented by a strong and resilient financial system. gdp growth averaged 6. 4 percent in the first semester of 2017. as of the second quarter of 2017, the philippines posted 74 consecutive quarters of uninterrupted growth ( i. e., q1 1999 to q2 2017 ) or a span of 18. 5 years, with growth accelerating in recent years. the government has set a growth target of 6. 5 to 7. 5 percent for this year, and 7. 0 to 8. 0 percent for 2018 up to 2022. we believe these targets are attainable, given strong macroeconomic fundamentals, rising government spending on critical infrastructure and human capital development, increasing private sector investments, and strong domestic consumption on the back of rising incomes of the country ’ s young and educated workforce. this strong economic performance did not happen overnight. rather, it is the result of meaningful reforms pursued since the 1997 asian financial crisis. the list of reforms is long and wide ranging. among its highlights is the adoption in 2002 of the inflation targeting framework. since 2009, we have consistently achieved our inflation target, except only in 2015 – 2016 when inflation went below 2 % due to unusually low oil prices. this track record has reinforced the credibility of the bsp ’ s inflation targeting framework. with its sound macroeconomic fundamentals, the philippines ’ economic outlook in the years ahead continues to be promising. inflation for the first 8 months of this year averaged 3. 1 percent, well within the target range of 2. 0 to 4. 0 percent for this year. we have often been asked why we have not yet raised policy rates given that inflation is trending higher this year and also given