to be manageable. based on the most recent bsp forecast, inflation this year could average 4. 6 percent – much lower than what you see in the developing world, but that is slightly above our target range of 2. 0 to 4. 0 percent. and by next year, we expect inflation to average 3. 9 percent, which is within our target band. the bsp supports timely implementation of targeted non - monetary measures by the national government to prevent price pressures from broadening. these include direct financial transfers to vulnerable sectors, and efforts to boost domestic production and importation of certain food commodities. for its part, the central bank is prepared to take preemptive action when there are stronger indications of possible disanchoring of inflation expectations. before the pandemic hit, we were on our way to a - level credit rating. while the virus set us back, the philippine economy was strong and the duterte administration carried on its game - changing reforms. not surprisingly, all the international and regional rating agencies unanimously affirmed the philippines ’ investment - grade ratings throughout the pandemic despite a wave of ratings downgrades for many advanced and emerging economies. now, the next administration has to continue the country ’ s pursuit of a - level rating. this can be done by crafting, among others, a well - thought - out fiscal consolidation framework, which has been prepared by the executive department and ratified by congress. so why take interest in the philippines? the philippines is currently in a demographic sweet spot. it has a younger population compared with the rest of the world. it has a rich talent pool, having an annual average of 750, 000 graduates across disciplines, forming a deep manpower pool of 45 million well - educated and hard - working workforce. in an ageing world, having a population with a median age of 25. 7 is an asset. moreover, the philippines ’ location is favorable for key markets as it is situated at the heart of major trading routes. at the height of the pandemic, as i said earlier, we didn ’ t sit idly by and wait for the virus to recede. instead, we pushed for game - changing reforms. we continued to invest in physical infrastructure and human capital. all these are meant to improve the philippines ’ competitiveness, boost its productive capacity, and make the philippines an even more attractive investment destination. in closing, we invite you to continue engaging with us. we thank our partners in spain who have

on covid - 19 response without incurring unmanageable debts. we reformed the tax system. we simplified the tax structure, rationalized fiscal incentives, reduced personal and commercial income tax rates, increased excise taxes on oil, cigarettes, and sweetened beverages. with the new tax system, the incoming administration will be in a better position to face the challenges of the post - covid economy. the philippines also enjoys healthy external accounts, with hefty gross international reserves that served as buffer during this pandemic. meanwhile, the peso depreciated by 2. 43 percent to ₱52. 27 as of may 23 from its end - 2021 level. this mirrors the market sentiment affecting all emerging markets across the globe amid the russiaukraine conflict. the movement of the peso is within the range of the national government ’ s macroeconomic assumptions for the year. we keep our market - determined exchange - rate policy and we intervene only to ensure orderly market conditions and to prevent excessive short - term volatility in the exchange rate. the stable banking system — which benefitted from regulatory reforms over the years — remains able to provide credit to consumers and businesses. loan growth is steadily picking up. prudent lending standards of banks also help keep the rise in bad debts within manageable levels while ample capitalization enables them to absorb shocks. on digital transformation, the central bank ’ s policy agenda includes digitalization of the country ’ s payments system. by 2023 or next year, we aim to digitalize at least half of all financial transactions and onboard at least 70 percent of all filipino adults into the formal financial system. complementing our digitalization agenda is the new financial consumer protection act. the law improves the resolution mechanisms for financial consumer complaints including those involving cybercrimes. the bsp has also issued six digital banking licenses, in line with our digital payments transformation roadmap. on sustainability, the central bank is at the forefront of promoting sustainability principles in the financial sector. we have issued regulations requiring banks to incorporate such principles into their operations. we are also among the early investors in the bank of international settlements ’ green bond fund and the asian green bond fund. the philippine government did not let this unprecedented crisis go to waste. it did not sit idly by and wait for the coronavirus to subside. instead, it continued to pursue game - changing reforms that help make the philippines a preferred investment destination. the government sustained the reform momentum in con