nestor a espenilla, jr : investing in sound policies towards sustainable growth speech by mr nestor a espenilla, jr, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the 2018 economic briefing of the american chamber of commerce of the philippines, inc. ( amcham ), manila, 24 april 2018. * * * ladies and gentlemen, good afternoon! i thank the officers and members of the american chamber of commerce of the philippines ( amcham ) for the invitation to speak today. my message has two parts. first, i will give an update on the economy and its prospects over the medium term. second, i will talk about the government ’ s policy directions, focusing on the bsp ’ s initiatives to sustain the growth momentum and make the philippines a preferred option for business and investment. let me pose a question you may have asked yourselves at some point : is now a good time to invest in the philippines? conventional wisdom tells us that investing requires right timing. if you get it wrong, you may fail to maximize the return on your resources, or you could be staring at significant losses. given the rational desire to avoid loss and reduce risk, it is easy to fall into the trap of being overly cautious and missing out on profitable opportunities. indecision and unnecessary waiting can also be costly. investing will always carry some degree of risk, and we can never fully anticipate how surprises can disrupt or influence the market. the key is to not make decisions blindly. indeed, information on potential risks and returns, as well as knowledge gained from prior experience, can be sources of confidence for any prudent investor. so, is now a good time to invest? do we have information to make the right call? the balance of information that we have suggests that it is indeed an opportune time. betting on the philippines we at the bsp remain optimistic about the philippine economy ’ s prospects, especially as economic activity continues to gain traction across the globe. according to the latest figures released by the imf, global gdp growth reached 3. 8 percent in 2017, the fastest pace since 2011 as investment and trade continued to pick up. the imf now forecasts the global economy to grow by about 3. 9 percent in 2018 and 2019, as accommodative policies support the stronger growth impulses in advanced and emerging economies alike. however, we continue to monitor developments that could dampen this

recent months, we have seen a firm anchoring to the bsp ’ s interest rate corridor as market rates strongly trended upwards. ( note : for example, the 91 t - bill rate has increased by more than 100bps since december 2017 ). our active domestic open market operations interact in close coordination with our foreign exchange market operations, adjustments to reserve requirements, systemic macro - prudential measures and risk - based supervision of individual banks. in sum, bsp actions remain timely and appropriate to dynamic market conditions. these actions help regulate the economy and control inflation. the signal will be continuously 3 / 5 bis central bankers'speeches reinforced by other bsp actions, as deemed necessary by developments. looking ahead, the bsp remains watchful against signs of inflation becoming more broad - based. we stand firm on our intent to take immediate and appropriate measures to ensure that our monetary policy stance supports our price and financial stability objectives. the coming task of the monetary board is to carefully evaluate the appropriateness of a measured policy response to firmly anchor inflation expectations in line with our forecast that inflation targets will continue to be met in 2018 - 2019. toward this end, we also note that economic growth remains solid enough to absorb some policy tightening, if warranted. the other issue pertains to keeping the financial system sound and stable amid constant shifts in the economic landscape. in particular, we cannot ignore how so - called megatrends have changed the way businesses operate. these megatrends have made policy making more complex. these include demographic changes and the rise of disruptive technologies. to address these challenges, the bsp trains its sights on implementing game - changing financial sector reforms to allow the financial system to be more flexible, market - driven, and innovative. at this point, let me focus on some of the major reforms that we have already put in place. the effective implementation of the irc has allowed us to initiate the gradual and phased reduction of reserve requirements consistent with efficient absorption of any excess liquidity. we began with a one percentage point cut effective in march this year. subsequent reductions — in the nature of liquidity - neutral operational adjustments — will be done with the proper pace, magnitude, and timing and will largely depend on the liquidity absorbing capacity of our open market operations. we would like to reiterate that as with the operational shift to the irc system, the reduction in reserve requirements is not intended to materially affect the prevailing monetary policy settings. think of it