or government at the cannes summit 2011. in this context the main focus has been put on the relationship between developed lcbms and the volatility of international capital flows, which is also the theme of today ’ s workshop. against this background, i would like to focus on the following points : objectives of the initiative and the contribution by the lcbms to increasing financial stability state of development of lcbms main challenges ahead objectives of the initiative the main objective of the initiative was and is to strengthen national and global financial stability. it is important to stress this. the development of lcbms enhances the resilience of bis central bankers ’ speeches the national financial systems and, therefore, global financial stability. in addition, a number of developing countries have set themselves the task of attracting long - term global investment capital to finance infrastructure investment and, in this way, to boost growth. but very rightly, the g20 action plan points out that “ future activities should … bolster the role that lcbms can play in improving domestic and global financial stability and strengthening the ability of economies to manage capital flows, thereby contributing to international monetary stability more generally. ” merely stating that developing these markets can have a stabilising effect does not tell us how to get there, nor what form the relevant process might take. in my view, there is a clear need to step up research and expand the necessary data base. useful though it may be to acquire data by conducting surveys at intervals of five, seven or ten years, this process is inadequate and hardly acceptable. yet we must be just as frank when considering the risks entailed in developing local bond markets. after all, they are an important playing field for short - term portfolio inflows and outflows. indeed, this is true of the present capital inflows to the emes : short - term portfolio investment represents no less than 50 % of capital inflows. as far as potential contributions by lcbms to financial stability are concerned, i would like to mention just a few which have proven important, not least in the context of the current financial crisis. deeper lcbms reduce the vulnerability of the relevant emes to fluctuating interest rates and exchange rates. the main reason for this is that lcbms help reduce currency and maturity mismatches, which trigger and amplify crises. thus, they help check contagion and prevent spillovers to the real economy. lcbms make

. growing tourist arrivals, rising business process outsourcing receipts, the boom in real estate and construction, a growing trade with partner nations, and the steady stream of remittances from overseas filipinos ( of ) support current domestic economic expansion. increasing domestic and foreign investments provide assurance of sustainable growth. we have posted record high foreign direct investments for two years in a row : usd 8 billion in 2016 and usd 10 billion in 2017. on the external front, the country ’ s balance of payments is firmly under control and is supported by a gir level of usd 80. 1 billion as of end - march 2018. this level assures payment for 7. 8 months ’ worth of imports of goods and services for the economy under the worst case scenario. 1 / 4 bis central bankers'speeches the movement of the peso remains market - driven and supported by sound macroeconomic fundamentals. high demand for the dollar can be attributed to higher import payments, residents ’ outward investments, and public and private sector debt repayment. these developments are fundamentally healthy, aid the country ’ s competitiveness and strengthen the economy in the long run. the latest inflation outturn for march 2018 at 4. 3 percent led to an average of 3. 8 percent for the first quarter of 2018. this remains within the government ’ s target range of 2 to 4 percent. recent inflation reading shows an elevated path in 2018, with baseline forecast nearing the high - end of the target range before decelerating to the midpoint in 2019. we are closely monitoring the situation. amidst the pick - up in inflation, we will carefully evaluate the appropriateness of a measured policy response to firmly anchor inflation expectations so that inflation targets will continue to be met in 2018 – 2019. thrift banking industry remains an anchor of stability amidst increased competition and evolving technologies, the thrift banking industry has exhibited sustained stability, resilience and commitment to support inclusive growth – thrift banks resources stood firmly at p1. 17 trillion at end - 2017, mostly funded by retail deposits, indicative of continued trust and confidence in the thrift banking industry. thrift banks continue to support msmes, real estate development and consumer financing, with a loan portfolio equivalent to about 71 percent of industry assets. nevertheless, the industry ’ s asset quality remains solid, with the npl ratio at 4. 7 percent in 2017 and npl coverage at 67 percent. retained earnings boosted the industry ’ s overall capital position as the capital adequacy