likewise improved and remained manageable. the peso remains firm, providing a mitigating effect on inflation, while broadly maintaining its external competitiveness. the banking sector has remained fundamentally sound. the banking system sustained a steady asset expansion for the last seven years supported by continued growth in deposit base. the continued asset clean - up of banks, accomplished through market - oriented schemes and without the use of public funds, boosted the banking system ’ s overall asset quality. the banking system ’ s npl ratio is now closer to the pre - crisis level of around 4. 0 percent. banks also remained capitalized at levels above both the bsp - regulatory requirement and the bis standard. the banking system ’ s capitalization is expected to improve further with banks ’ increased issuance of hybrid financial instruments to strengthen their capital base. as a footnote to banking performance last year, i would like to mention that the banking system was not significantly affected by us subprime mortgage market problems. first, because philippine bank exposure to the cdo market was only 0. 2 percent of total bank assets as of mid 2007, and none of these have subprime mortgages as underlying assets. second, the country has been less dependent on external borrowing and has, therefore, become less vulnerable to external shocks. third, there is ample liquidity in the system and hence, any credit squeeze could be manageable. the fiscal sector likewise performed well, with the national government posting a p9. 4 billion budget deficit in 2007, its lowest in ten years. this was achieved through enhanced revenue collections and privatization efforts. moreover, for the first time in more than a decade, the consolidated public sector financial position registered a surplus in 2006. this continued on in the first nine months of 2007 with the public sector posting a surplus of p52. 7 billion. gains brought about by the government ’ s fiscal consolidation efforts were evident in the material reduction in the public debt burden. all in all, one could say, 2007 has been marked by an auspicious alignment of the stars – what should be going up, went up, what should go down, went down. key challenges ahead while we have implemented in recent years prudent macroeconomic policies and structural reforms, which allowed us to achieve these important milestones in the previous year, the philippine economy continues to face challenges from both the global and domestic fronts. these include : ( 1 ) the us economic slowdown ; ( 2 ) further disruptions in the global

mpr forward mpr jun. 22 mp meeting 12. 0 11. 0 10. 0 9. 0 8. 0 7. 0 6. 0 5. 0 4. 0 3. 0 2. 0 1. 0 0. 0 ( * ) the corridor is constructed following the methodology in boxes v. 1 of march 2020 mp report and v. 3 of march 2022 mp report. it includes the may economic expectations survey ( ees ) and the june financial traders survey ( fts ) previous to the mp meeting, plus the average smoothed forward curve for the quarter ended on 1 june. this is calculated by extracting the implicit mpr considering the forward curve over the overnight swap curve of up to 2 years, discounting the fixed rates of each maturity to the simple accrual of the overnight index swap ( ois ). for the current quarter, the surveys and the forward curve consider the average of daily effective data and are completed with the respective sources source : central bank of chile. table 1 international baseline scenario assumptions 2022 ( f ) mar. 22 jun. 22 report report 2023 ( f ) mar. 22 jun. 22 report report 2024 ( f ) mar. 22 jun. 22 report report ( annual change, percent ) terms of trade trading partners'gdp world gdp at ppp developed economies gdp at ppp emerging economies gdp at ppp 11. 8 6. 3 6. 1 5. 1 7. 0 - 3. 1 3. 3 3. 1 2. 9 3. 2 - 4. 0 2. 7 2. 6 2. 4 2. 6 lme copper price ( us $ cent / lb ) average wti - brent oil price ( us $ / barrel ) ( f ) forecast. source : central bank of chile. - 3. 1 3. 3 3. 4 2. 0 4. 3 ( level ) - 4. 1 2. 9 2. 7 1. 5 3. 5 - 1. 5 3. 1 3. 3 1. 8 4. 3 - 0. 2 3. 1 3. 2 1. 7 4. 2 table 2 domestic scenario gdp demanda interna domestic demand ( w / o inventory change ) gross fixed capital formation ( gfcf ) total consumption private consumption goods and services exports goods and services imports current account ( % of gdp ) gross national savings ( % of gdp ) nominal gfcf ( % of gdp ) 11. 7 21. 6 18. 0 17