benjamin e diokno : navigating the philippine economy toward recovery speech by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the fitch ratings annual review, manila, 7 february 2022. * * * good afternoon. recent developments show the philippines is on the road to recovery, with encouraging signs suggesting that the worst may be behind us. the economy grew by 5. 6 percent last year, exceeding the government forecasts of 5 to 5. 5 percent and reversing the recession in 2020. the unemployment rate fell to 6. 5 percent in november 2021 from a peak of 17. 6 percent in april 2020. full - year inflation averaged 3. 9 percent in 2021 based on 2018 cpi series. inflation further eased to 3 percent in january 2022, supporting the narrative that inflation is on a downward trajectory. the development budget coordination committee ( dbcc ) kept the inflation target range at 3. 0 percent ± 1. 0 percentage point for 2022 – 2024. inflation expectations are well anchored, as shown by surveys of private sector economists and forecasts of multilateral agencies. overall liquidity conditions are sound. in december 2021, m3 expanded by 7. 7 percent. lending by universal and commercial banks rose for the fifth straight month, up 4. 6 percent year - on - year. this signals an improvement in consumption and investment activities. exposure to bad debts remained manageable. the npl ratio of the philippine banking system settled at 4. 3 percent as of end - november 2021. banks are well capitalized. capital adequacy ratio of ukbs is well above the bsp ’ s minimum requirement of 10 percent and the bank for international settlements ’ 8 percent. the country ’ s external sector remains robust, supported by steady sources of foreign exchange. remittances rose by 5. 2 percent year - on - year to usd28. 4 billion in january to november 2021 while bpo revenues grew by 8. 3 percent to usd17. 4 billion in january to september 2021. fdis grew by 48. 1 percent in the first 10 months of last year to usd8. 1 billion, as foreign investor sentiment improved. external debt - to - gdp ratio stood at 27. 3 percent as of end - september 2021 compared with about 60. 0 percent in mid - 2000s. gross international reserves ( gir ) stood at a hefty us $ 108

only to market factors outside the influence of bank managers. many european banks continue to have very high administrative costs, for example. and something could certainly be done about that. it is my expectation that interest income will play a less important role in the coming years. this is also a reason why there are prospects of rising earnings for europe ’ s banks, namely if they succeed in adjusting their business models. some may argue that the tighter regulation of the banking sector is weighing heavily on some banks. no one disputes that we do not need “ regulation for the sake of regulation ”. neither is it about shackling market participants unnecessarily ; rather, an adequate ecb ( 2015 ), financial stability review, november. bis central bankers ’ speeches regulatory framework can create room for manoeuvre. that ’ s because regulation which ensures more stability and reduces information asymmetries and other destabilising factors helps secure freedom of choice for market participants. to meet this objective, regulators must continually review whether the existing rules are proportionate to current and future expected risks in the financial market. banks should adjust to this. just as the situation in the financial markets changes – think, for example, of financial innovation – so too does the need for regulation. that was why, in the light of the recent financial crisis, it was necessary to adapt the rules. but i would not call it a “ regulation tsunami ” in this context. many banks have held too little capital to be able to survive a large economic shock unscathed. accordingly, banks are now required to have larger and higher quality buffers. this also serves to protect the tax payer. and it has proven successful : european banks – thanks to higher tier 1 capital ratios – have become more resilient. the financial crisis also showed that panic situations can very quickly lead to liquidity shortages in the interbank market. that is why sufficient liquidity buffers are necessary. these buffers are the liquidity coverage ratio ( lcr ) and the net stable funding ratio ( nsfr ), the latter being the structural liquidity ratio. i am aware that the prospect of new rules can lead to uncertainty. and i know that it is not always easy for you to deal with this uncertainty. in the meantime, however, you have significantly more planning certainty. what were until recently loose guidelines are now becoming concrete. it is clear, for example, that deutsche bank, as a global systemically important bank, has to