amando m tetangco, jr : the philippine economy – building resilience in a time of uncertainty speech by mr amando m tetangco, jr, governor of the central bank of the philippines ( bangko sentral ng pilipinas ), at the economic forum “ philippine economic outlook – prospects and challenges ”, hosted by security bank, manila, 11 february 2009. * * * distinguished officers and staff of security bank led by its chairman mr. frederick y. dy, president and ceo mr. alberto s. villarosa, other distinguished speakers, guests, ladies and gentlemen : good afternoon! it is my pleasure to join you for today ’ s economic briefing. i laud the efforts of security bank for making this gathering possible. i welcome opportunities such as this to help shed light on our current economic and financial environment, from the vantage point of the central bank, which i hope is not far removed from how it is in the “ real ” world. much has already been said and written about the current environment we are in – it has been described as being “ a tsunami of historic proportions ” to being the “ the worst crisis since the 1930s ”. every writer or speaker seems to want to paint a picture direr than the one before. today, i don ’ t want to be included in that list – rather, i hope i can more candidly share with you a balanced ( realistic ) view. let ’ s begin with what we now know against what is still uncertain. three things stand out. first, we have clearly seen that, on the one hand, the crisis has moved from its epicenter – the us and europe – and has begun to manifest itself in emerging markets, including our part of the world. on the other hand, however, we don ’ t know how much further or deeper the crisis ’ reach and breadth would be once the dust, as they say, finally settles. second, so far the policy prescriptions from the major economies have been “ unconventional ” – untested ( so to speak ) in these unchartered territories we now trek. unfortunately, the very nature of these prescriptions requires patience not only from those in the major economies but also from those at the periphery such as the philippines. the policy prescriptions clearly need time to filter to the markets and achieve the necessary effects. question is, how much patience and tolerance do the markets have? other questions that are perhaps racing in stakeholders ’ minds are :

strong economic growth and low inflation. the integration of the financial markets the integration of the european financial markets was one of the advantages expected from the introduction of the single currency. what can be said today? as far as money markets are concerned, a very strong convergence of short - term interest rates could be observed by the end of 1998. after the introduction of the euro, the implementation of the operational framework for the single monetary policy and the new target system have accelerated the creation of a liquid and integrated money market for the whole of the euro area. the speed at which the eleven national money markets have integrated into one single large market is remarkable. the target system has allowed for a swift and efficient transfer of funds within the monetary union, thus reducing interest rate differentials between countries. the elimination of short - term interest rate differences was in turn necessary to enable the eurosystem to conduct its monetary policy in an efficient manner in the entire euro area. the success of target cannot be denied, not only from a technical point of view, but also from a commercial one as it has for the moment captured about 70 % of the total volume of large value cross - border payments in the euro area. although it started earlier, the process of integrating bond markets will take longer. the impact of the single monetary policy is indeed slighter on these markets and national characteristics - in particular different tax regimes - still remain important. however, the disappearance of the exchange risk, the harmonisation of market practices, the redenomination of government debt into euro at the beginning of the third stage of emu and important issues of government bonds in euro have contributed greatly to accelerate the process. yet this has not led to the disappearance of interest rate spreads between countries. the european bond market is, as you know, largely dominated by the national treasury departments which still place the major part of their issues on their domestic markets. while one has witnessed a decreasing spread between interest rates as a result both of the commitments made within the stability and growth pact and of the disappearance of the exchange risk, differences due to the size, liquidity and to the specific risk of each sovereign issue, however, still remain. though the european market of government bonds still suffers from a certain segmentation, the corporate bond market has already at present exceeded all expectations. during the first six months of this year, european companies are said to have issued more than double the amount registered in 1998. moreover, the average size of these issues has increased considerably. this