turning point in the last quarter of 2006. thus, we are now in the continuing upward phase of the business cycle, as validated by the strong growth of the economy posted in the first three quarters of 2007. moving forward and barring any unforeseen risks, economic growth is expected to continue. this will be driven by the combined acceleration of the industry and services sectors on the production side and consumption and investments, both private and government, on the expenditure side. average inflation was below the target of 4 - 5 percent in 2007, is projected to fall within the 4 percent ± 1 percentage point target for 2008 and within the 3. 5 percent ± 1 percentage point target for 2009. this benign inflation outlook would in turn allow us to maintain an environment of low interest rates. the external payments position is seen to remain as a source of strength for the economy over the near term. dollar inflows particularly from remittances and foreign investments are likely to remain robust. this should enable us to further build up our cushion of international reserves, and continue to provide support to the peso. we also envision a more resilient and profitable banking system as banks improve their ability to anticipate and manage risks, perform their functions of intermediating funds to the broadest set of users, and providing alternative investment vehicles to savers. policy directions this brings me to the second reason why i am convinced we are up to the task – ladies and gentlemen, we are focused on our reform agenda. the bsp ’ s main policy thrusts in 2008 will involve nurturing a resilient economy by ensuring that this is anchored on sound macroeconomic fundamentals and building a strong financial system that is flexible in the face of growing global integration and innovation. managing risks to inflation and inflation expectations will remain the key policy priority of the bsp. in this regard, the bsp will maintain an appropriately prudent monetary policy stance supportive of non - inflationary growth. this will require relentless environmental scanning, continuous surveillance of key macroeconomic variables and regular sharpening of our inflation forecasting models. on the external front, our policies will be geared toward : ( 1 ) ensuring sustainability of the country ’ s external debt, ( 2 ) maintaining a market - determined exchange rate, with scope for occasional official action in cases of sharp movements in the peso, and ( 3 ) maintaining a comfortable level of reserves as market opportunities will allow. reforms in the financial sector will be aimed at maintaining

working with industry players, industry associations such as baiphil, and other financial regulators to further strengthen the foundation of corporate governance for our supervised financial institutions. rationale for corporate governance reforms on a global level, adherence to good corporate governance also plays a key role in sustaining the overall health of the financial system and ensuring its ability to withstand crises. to recall, fundamental weaknesses in corporate governance have been identified as among the factors that triggered the 1997 asian crisis and other financial catastrophes in recent years. in the case of the asian crisis, financial systems in the region became vulnerable to external shocks arising from excessive concentration of risk, poor credit policies, and inadequate risk management systems. the international response, which emerged as a consensus was to move toward best practices particularly on corporate governance. on our part, we at the bangko sentral rationalized the regulatory framework to closely align prudential standards with practices that promote the good governance tenets of transparency, accountability and fairness. let me now highlight these initiatives. bsp ’ s corporate governance initiatives bangko sentral ’ s corporate governance agenda is anchored on the practice of effective corporate directorship, sound audit and compliance systems, and enhanced disclosure in financial reporting. in this regard, we have issued several regulations intended to reinforce these critical elements of good governance. at the core of these regulatory initiatives is the leading role to be played by the board of directors in the overall corporate governance agenda. clearly, board oversight is key to effective bank governance and ultimately, to achieving overall stability within the organization. toward this end, we have emphasized the collective responsibility of the banks ’ board of directors and senior management to ensure the soundness and stability of their respective banks. one way to instill such accountability to the board of directors is through director education. since 2002, the bsp has been requiring bank directors and trustees of non - stock savings and loans associations ( nsslas ) to undergo the mandatory seminar on corporate governance to familiarize them with their duties and responsibilities as corporate decision makers. as of end - march 2007, a total of 6, 856 directors and trustees or 84. 7 percent of the 8, 094 directors / trustees of banks, quasi - banks and nsslas have attended corporate governance courses. let me take this opportunity to remind those who have yet to take the governance course to get their schedule as soon as possible. this is mandatory. we have also enforced and strengthened our fit and proper standards for directors and officers of financial institutions. in this