the story is simple : there is no substitute for conscientious preparation and hard work to guard ourselves against the big bad wolf. analogous to the construction of the brick house in the story, the philippine economy was built through the pursuit of wide - ranging, and at times difficult, policy reforms over several years which allowed the economy to endure several big bad crises. building the house of bricks 1. the output expansion we have realized for the past two decades has been built on purposeful structural reforms supported by disciplined macroeconomic policymaking. this paved the way for the economy to increase investments, pursue fiscal consolidation and reduce debt, improve labor dynamics, and enhance competitiveness, all of which contributed to the philippines becoming one of the fastest growing economies in emerging asia. 2. our efforts toward maintaining price and financial stability also bore fruits. last year marked the fifth straight year that the inflation target has been achieved. inflation in the first nine months of 2014 at 4. 4 percent is also well within the government ’ s full year target of 3 – 5 percent. on the other hand, amid bouts of financial market volatilities, ample liquidity in the system granted domestic borrowers with continued access to domestic financing to support economic activities. the 10 - year us treasury traded at 2. 137 pct. on 15 october 2014. bis central bankers ’ speeches 3. the country ’ s current account remains in surplus, supported by sustained increase in overseas filipinos ’ ( ofs ) remittances, business process outsourcing ( bpo ) revenues, as well as tourism receipts. our foreign exchange ( fx ) reserves are adequate to meet the country ’ s fx liquidity requirements. 4. sustained structural reforms have kept our banking system in good shape, demonstrated by improved quality of banks ’ assets and loan portfolios, profitability metrics as well as adequacy of capital. the bsp is also on track with the requirements under the asean financial integration framework ( afif ) with the recent approval of the amendments to the foreign bank entry liberalization law. 5. meanwhile, in support of the national government ’ s ( ng ) overarching goal of achieving inclusive growth, the bsp ardently pursues the implementation of its financial inclusion program. we are further inspired with the increase in the number of participants in the bsp ’ s programs on microfinance, credit surety fund, and economic and financial learning. the potential big bad wolves the philippine economy also faces potential

amando m tetangco, jr : keeping the house in order amid mounting uncertainties speech by mr amando m tetangco, jr, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the foreign correspondents association of the philippines ( focap ) media forum, makati city, 29 october 2014. * * * the last time i joined you in this forum was at end november 2013. since then, the fed taper had become a reality – this week, the fed is expected to announce the end of its asset purchase program. the market frenzy about the onset of the taper was replaced by an eerie calm as soon as it actually commenced. in the six months or so that followed the beginning of taper, the 10 - year us treasury as well as the dxy traded in a relatively narrow band. the second half of the year, however, was not as calm. the market moved from a belief that the fed would raise its target rate sooner than earlier anticipated ( because of strong us data releases ), to a belief that the fed would still keep rates low “ for a considerable time ”. in either case, the strong usd dollar story had begun to form a solid base – market caused the dxy to start to ratchet up and the 10 - year treasury yield to begin falling precipitously. 1 this fundamental story was not, however, without challenge. there were bumps along the way as the ecb brought short - dated interest rates to negative territory, as tensions in ukraine increased, and as multilateral bodies continued to predict weak global growth ( the imf described it as “ mediocre ”. ) throughout this period, our own peso gs curve flattened while peso tracked the dxy movements. such irregular shifts in global market behavior confirm the need for economies to insulate themselves from spillovers from these external volatilities. in the bsp, we have long subscribed to the idea that the best way to do this, is to make the difficult and tough choices that would keep our own house in order. this reminds me of the classic children ’ s story about the three little pigs. the first two pigs took the easier way of building their houses, using straws and sticks, while the third little pig built his house using bricks. on the day the big bad wolf attacked, only the house of bricks stood unscathed. the moral of