philosopher aristotle once said “ one swallow does not a summer make. ” from the philippine perspective, we move forward in 2016 with cautious optimism. we are cautious – because we are mindful of the challenges ahead and of the possibility that our operating environment can change so swiftly at a scale we may not have anticipated. yet we are optimistic because we start from a position of strength, having managed to address obstacles we encountered in 2015 and the great financial crisis in 2007 – 2008. at this point, it will be helpful if i give an assessment of 2015 and then move on to 2016. after i complete my narrative, you can make your own judgment on the state of our economy. recalling 2015 2015 brought with it, its own challenges and opportunities. global growth remained uneven, resulting in a divergence in policy responses from major central banks – the us fed finally went ahead with its much - awaited “ lift - off ” and raised interest rates ; china devalued its currency ; while the european central bank provided further stimulus to its economy with interest rate cuts and an expanded bond purchase program. bis central bankers ’ speeches these external headwinds made for some rough sailing for the philippines in 2015 due to higher risk aversion among investors. some capital flowed out particularly in the second half of the year, the philippine stock market took a hit and the peso depreciated. there were similar shifts in financial markets across emerging asia. nevertheless, domestic sources of resilience kept the philippine economy on a steady noninflationary growth. low and stable inflation – 1. 4 % in 2015, the lowest since the bsp adopted the inflation targeting framework in 2002 – continued to encourage investments and business expansion. in the third quarter of 2015, our economy grew at an accelerated pace of 6. 0 percent. this made the philippines one of the fastest - growing economies in asia in the first nine months last year. at the same time, the country ’ s sound, stable and liquid banking system provided solid support to our economy in 2015, with bank lending continuing to grow in double - digit rates, with credit flowing particularly to the productive sectors. and as a result of the continuing cooperation between the bsp and the banking sector to continue to enhance governance and risk management practices of banks, industry profitability improved further with return on equity rising from 9. 67 % in september 2014 to 10. 04 % in september 2015 ; asset quality got even better with gross npl ratio improving to 2. 32

reforms that necessarily diffused attention from critical vulnerabilities. to some extent, these criticisms suffer the classic failure of claiming that what seems obvious in hindsight was as clear at the time. many are unfair in the degree of influence they expect the fund to be able to exert over a reluctant member - recall the constraints i described at the beginning on the fund ’ s powers over its members. and many of the criticisms fail to recognize the difficulty of making definitive judgements about the path of policies consistent with sustainability. yet elements of this general diagnosis of the fund ’ s policy advice to emerging market economies have substantial merit. if the fund is going to contribute to a process of well - targeted reform, particularly in the more vulnerable countries, it probably needs to raise the bar, to increase the level of ambition of its policy recommendations. greater policy focus is required on the principal sources of near - term vulnerability, ideally without fully eclipsing longer - term institution building and structural reforms important to raising growth potential. a risk - based framework for determining the hierarchy of policy priorities is important. such a framework would almost certainly entail more focus on unwinding large balance sheet problems ( both with respect to the sovereign and the financial system ), reducing sovereign debt to more sustainable levels, making debt dynamics less vulnerable to shocks, increasing liquidity buffers, and preserving appropriate exchange rate arrangements. addressing these issues would help reduce the risk of future capital account crises. it would create better conditions for private sector growth. in virtually every context where public sector debt burdens are high and fiscal deficits large, more ambition in the adjustment path should be positive for growth through the effect on confidence, interest rates, and the exchange rate. of course the fund can ’ t want reform more than its members. the principal burden for running a set of policies more commensurate with the risks emerging markets face in this world rests with their governments. the role of the fund should be to help guide and encourage them to the point where they build in a more substantial degree of self - insurance. the fund should not acquiesce in and validate policy frameworks that fall substantially short of the threshold necessary to safely navigate this world of high variability in the external environment and occasional domestic political pressures to weaken policies. changing the surveillance framework part of the challenge entails reorienting surveillance, the process through which the fund ’ s policy advice is delivered, to make it more effective. the surveillance framework of today has a