as such, involvement of external equity in such a transaction would likely be necessary. indeed, from a national point of view, the entry of foreign purchasers for some or all of the banks would help transfer both credit and liquidity risk to those in a better position to bear them. this is not as far - fetched a scenario as it might appear to some ; astute bankers recognize that there is profitable banking business to be done in ireland in the years to come, though they will differ on the optimal timing and pricing of entry. we ’ ll be contributing to an intensified effort to identify viable measures along these lines to select and implement the most cost - effective of them, as it is clear that all will benefit from greater market confidence in the financial situation of the banks as in the sovereign. towards a virtuous circle this is a virtuous circle we are seeking to enter and exploit. even if moving towards a stronger banking system in terms of capital and liquidity has entailed costly outlays for the state, it is a prerequisite for ensuring the credit of the state. likewise, healthier public finances are indispensible for keeping interest costs and ensuring that the banks have ready access to market funding. in the end, i believe it is the prospects for effective fiscal adjustment against the background of the global macroeconomic recovery that will most directly determine the degree to which investors will be fully convinced that the banks have been de - risked and strengthened in the manner envisaged by the basel 3 process, and thus able to contribute more effectively themselves to the consolidation of that recovery. besides, even if there is a negative initial demand effect, healthy government finances are – like healthy banks – needed for job creation and economic recovery.

that compared with the average performance from 2007 – 2014 and 2015, the philippine economy remains strong and resilient. we have seen the following : • higher growth ; • lower inflation ; • lower - than - target fiscal deficit ; • ample liquidity and credit ( 12. 4 % m3 growth and 17. 6 % credit growth ) ; • good loan quality and capital base of banks ; and • robust external payments position characterized by bis central bankers ’ speeches • current account surplus ; • comfortable gir ; and • manageable external debt profile and debt burden we will be discussing in some detail the factors that influenced the outturn for these macroeconomic variables in the next few slides. let me clarify that the transformation of the philippine economy is a product of a series of policy and structural reforms in the last two decades, disciplined macroeconomic management, and improvements in governance. the selected list of critical reforms helped us in : • expanding the role of market forces in key sectors of the economy ; • encouraging investments ; • ensuring fiscal sustainability ; • strengthening the banking sector ; • promoting innovation and competition ; • encouraging stronger private sector participation ; and • finally, inspiring business activity an important consequence of these structural reforms is an improvement in the economy ’ s productive capacity. potential output growth has been steadily rising alongside improvement in the share of total factor productivity ( tfp ) growth. this is consistent with a declining incremental capital - output ratio ( icor ) as well as the observed structural shift in employment and production structures that require higher levels of skills and knowledge. it is no small measure that the country ’ s macroeconomic progress has been achieved despite a very challenging global economic landscape. some of the recent adverse external developments that triggered episodes of financial market anxieties and volatilities in capital flows, exchange rate, and stock market include the following : • first is the on - going rebalancing in the chinese economy from export - led to services and domestic consumption - driven. while this could result in slower economic growth for china, such is believed to be more sustainable. as a key trading partner, a slower growing china could, however, affect our exports. • second is the uncertainty in the timing of policy rate normalization in the us. the fed reserve first raised its target fed funds rate in december last year from 0 – 0. 25 % to 0. 25 – 0. 50 % for the first time since the global financial crisis. markets have been speculating when the fed ’ s