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

because they would have to repay the guaranteed debt forthwith ( which they would have been unable to do ). this effectively postponed drastic restructuring action until the end of the guarantee period, by which time the government ’ s entry into the eu - imf programme was imminent. • third, failure to consult. the irish decision to provide a blanket guarantee, without prior consultation, triggered immense pressure for guarantees all over europe. other governments resented the irish action and this has made it difficult for the government to make its case for burden - sharing with europe. • fourth, failure to seize immediate control over the management of anglo. it should be assumed that the existing management of a bank whose business model has lost the confidence of the market and which has run out of cash have neither the expertise nor the incentive to recover the situation safely. the public authorities should have intervened immediately to take control of the bank, for which bis central bankers ’ speeches nationalisation was the available tool. fortunately nationalisation did follow in january 2009 without evident value destruction having taken place in the intervening period. how much does this matter? having made those criticisms, it is important to keep the scale in perspective. the decisions on the night of the guarantee did of course have consequences for ireland. but there has been a tendency to overstate the extent of the impact of that night ’ s decisions on the subsequent welfare of the nation. it would be hard to deny that most – i would hazard a figure of at least 80 – 90 % – of the overall hardship that followed the bursting of the bubble, was ( albeit unbeknownst to the decision - makers that night ) already inescapably embedded in the situation. the damage had been made unavoidable by the unrestrained credit and property boom. ( the fiscal austerity measures that have had to be taken are not just due to the €40 billion or so in additional net debt that can be linked to the guarantee, but also reflect the far larger impact of the ending of the construction boom on the government ’ s tax revenue and spending needs. and the fiscal costs are only one aspect of the total damage to ireland ). in my letter to the inquiry of february 12, i have distinguished between a hypothetical “ hindsight ” scenario ( 1 ), in which the government would have been convincingly advised of the actual likely magnitude of the cost of a guarantee, and the actual scenario ( 2 ) with only the information available at the time. in the actual case the government