our economy requires. for 2014, a central scenario has been outlined in which the factors that have been affecting domestic demand progressively slacken. it is projected that the processes of adjustment in the economy, and most particularly the redressing of private - sector debt and the ongoing fiscal consolidation, will continue to influence the pace of recovery of demand and activity ; but, at the same time, the reduction in uncertainty and the culmination of the restructuring of credit institutions, along with their improved results, will lay the foundations for improving financial conditions for the resident sectors. this outlook of progressive re - balancing of the external and domestic components of demand is not free from uncertainty. in particular, while the likelihood of fresh bouts of instability in the euro area has lessened significantly, this cannot be ruled out completely in the future. moreover, should growth in certain emerging regions be checked more sharply than is currently projected, this might have consequences for spanish exports, which in recent years have been increasingly underpinned by these markets? in this respect, the potential reduction in the degree of monetary expansion in the united states might significantly affect the emerging countries, in their capital movements and in their exchange rates, most particularly latin america. the state budget for 2014 it is against this macroeconomic background that the discussions on the draft budget for 2014 are framed. i shall first refer to the forecasts for the end of the current budgetary year and the macroeconomic projections for the coming year. as regards 2013, the revised figure for the overall general government balance, in national accounts terms, has been released for the second quarter. it shows a deficit of 2. 8 % of gdp, excluding the effect of the public assistance to financial institutions, compared with the figure of 3 % recorded in the same period a year earlier, marking an improvement of 0. 2 pp of gdp. more updated figures ( to august ) have also been released for overall general government, bis central bankers ’ speeches excluding local government. the cumulative deficit to august is estimated to stand at 4. 8 % of gdp. as indicated by the european commission in its autumn projections and having regard to the budget outturn in the first half of 2013, meeting the budget deficit target of 6. 5 % is achievable. however, as the commission has stressed, there are risks of slippage arising from the weakness shown by revenue, meaning that, to meet the target, revenue will have to pick up in the closing months of the year. the effort involved in

strong external payments dynamics, providing comfortable buffers against external shocks. reflecting these prudent external sector policies, the country ’ s balance of payments ( bop ) position posted a surplus of us $ 3. 2 billion in the first half of the year. the resilience of of remittances and the sharp recovery of exports contributed largely to the country ’ s favorable external payments dynamics. the country ’ s external debt profile continues to improve. six years ago, our external debt - to - gdp ratio was around 70 percent. as of march 2010, this ratio was down to 33 percent. the long - dated maturity structure of our foreign currency debt, helps limit rollover and foreign exchange risks. the country ’ s debt service burden as percent of gdp, which had previously hovered around 10 percent [ 2001 – 2003 ], eased to 6 percent as of march 2010. international reserves have climbed to new highs, providing strong coverage for both imports and short - term external debt. at end - july 2010, the gir stood at us $ 48. 6 billion. at this level, the gir can cover 9 months of imports and is equivalent to 9. 3 times the country ’ s short - term external debt based on original maturity and 5. 1 times based on residual maturity, thus providing a strong cushion against external shocks. as a result of the strong external liquidity position, the philippine peso has remained broadly stable. the trends in the real effective exchange rate ( reer ) show that the peso has generally maintained its international competitiveness over the last ten years. with generally lower inflation rates, the philippine peso has accommodated some appreciation, but without undermining external price competitiveness. third, on financial sector policy – the bsp has put in place critical reforms geared toward maintaining a healthy banking system. the package of reforms includes the disposal of banks ’ bad assets, the promotion of good corporate governance and transparency practices, and the upgrading of risk management standards. as a result, we have today an efficient, sound, and competitive financial system. these critical reforms have been successful in steadily expanding and strengthening the banking system. indicators of the health of the banking system continue to post favorable readings, with asset levels and bank earnings continuing to improve. the capital adequacy ratio remained high at 16 percent and non - performing loans also remained generally low at less than 4 percent of total loans. the favorable performance of the domestic financial markets reflects the upturn in the country ’ s