the third quarter of 2012 of 7. 1 percent was the highest among the asean countries, which all posted positive growth. indonesia grew at 6. 2 percent, malaysia 5. 2. percent, vietnam 4. 7 percent, thailand 3. 0 percent, and singapore 0. 3 percent. in addition to easy monetary conditions, the timely increases in government spending and increased private sector activity helped the philippines stay on this uptrend. the robust output growth was achieved in a low inflation environment. headline inflation during the first eleven months of 2012 of 3. 2 percent remains well - within the government ’ s inflation target range of 3. 0 – 5. 0 percent for the year. this would make 2012 the fourth consecutive year that the bsp is able to keep inflation to within the government ’ s target range. with this continued benign inflation outlook, businesses could expect the bsp to keep interest rates at low levels in 2013. in other words, ladies and gentlemen, the philippines has again achieved the sought - after alignment of strong growth and low inflation … this could lead one to ask : is the philippine economy a super economy that it appears to have been immune from any adverse impact from global developments? the answer – ladies and gentlemen – is no, it isn ’ t. bis central bankers ’ speeches 2012 – a year of continued strong capital flows for the philippines. a year that tested institutions global developments did spill over to the philippines but not in the form of slower economic growth. global developments spilled over to the philippines in the form of surges in capital flows to the economy. which have been manifested in volatilities in the financial markets. take the exchange rate. this slide shows that in 2012, the peso has been on an appreciating trend. take a look at the stock market. this slide shows an appreciating trend also for the stock market. take a look at the tbills market, where yields have been on a downtrend. all these point to strong investor interest in our currency, our stock market and our gs market. in this year of transition, our better growth prospects have continued to make the economy a magnet for capital flows. with investment grade status just around the corner, we could continue to see more foreign capital come into our domestic financial markets. how has the bsp addressed these surges in capital flows? bsp follows a pragmatic approach. we employ a menu of policy options – our enhanced policy tool kit. first,

. bis central bankers ’ speeches beyond the preservation of monetary and financial stability, the bsp will also continue its advocacies to support local enterprises, promote inclusive growth and help alleviate poverty. thus, the bsp will sustain its advocacies on microfinance, financial inclusion, consumer protection and financial education with greater energy. on the external front, the bsp will continue to maintain a market - determined exchange rate ; keep a comfortable level of reserves ; and continue to promote external debt sustainability by keeping the country ’ s outstanding external debt manageable. in 2013, as policies further engender a sound domestic macroeconomy, we foresee continued solid economic growth amidst stable prices, a relatively stable exchange rate, and a responsive banking system that is able to withstand significant external shocks. conclusion ladies and gentlemen, 2012 was a year of transition for the global economy and a year of further strengthening and consolidation for the philippine economy. in the face of the relative economic stability we have gained during this transition, and the support of domestic policy makers in our period of consolidation, it is my hope that rotarians would make 2013 a year of expansion. a year when all of you would seek – more actively – every opportunity to create a better life not only for yourselves, but for a greater majority of our countrymen. transition brings a traveler from one point in his journey to the next. consolidation strengthens his foothold at every point. expansion provides the traveler with more options during his journey. the private sector represented by rotarians, and the government are all travelers on this economic journey. it is my hope, therefore, that as you and the bsp take on the challenges that our path throw at us, we would be able to continue working together to bring our country to the next point. one that is prosperous for more, if not for all, filipinos. bis central bankers ’ speeches