average ( 2005 – 2012 ) : philippines – 52. 2 ; malaysia – 144. 6 ; singapore – 290. 6 ; thailand – 123. 6 ; indonesia – 44. 3 ; taiwan ( prc ) – 118. 7 ; south korea – 84. 6. bis central bankers ’ speeches inflation would remain positive. these are wage rigidities and the upside risks from pending petitions for utility rate adjustments ( electricity ) and potential power shortages. given this scenario, what would the monetary response of the bsp be? our initial projections using lower oil prices show that inflation would still be within the target range for 2015, which is now lower at 2 – 4 percent compared to the previous year ’ s target of 3 – 5 percent. indications of easing inflationary pressures owing in part to the decline in international oil prices as well as signs of robust domestic economic growth allow the bsp some room to maintain its current monetary policy stance. even so, we do not pre - commit to a set course of action. as i have always said, the stance of monetary policy will remain data - dependent. one thing we keep in the back of our minds is that prices can reverse and often very quickly. if you have been in this market long enough – as i believe some in the audience have – you know that markets tend to get ahead of themselves. so, we continue to watch developments in the oil market carefully and how these affect inflation and growth dynamics, to see if there is any need to make adjustments in the stance of policy. while volatilities in oil prices have complicated the balance of growth prospects, there are the other underlying other risks that we see in the horizon. these include a bumpy growth path for china, delays in the needed structural reforms in the eu and japan, and geopolitical risks that could arise from a worsening of the situation in russia or the middle east – all of which can heighten financial market volatilities. can we remain steadfast in 2015? going back to the earlier question of whether we will be able to sustain our position of strength in 2015. let me share that, in the areas under the purview of the bsp, we believe we will be able to withstand headwinds in the global economy. and i have four reasons. one, our monetary policy is focused. while we are mindful of developments externally, we will always adjust policy in consideration of domestic demand and supply dynamics as reflected in our forecasted inflation path.

the fed would be hard - pressed to hike rates by any significant measure ( as in june this year ) if oil prices continue to drop because inflation in the us will be soft. in addition, low oil prices increase the risk of deflation in the eu and japan, raising the likelihood that more easing measures would be put in place. in other words, ladies and gentlemen, whereas markets used to have the confidence in the trend of monetary policies, this new uncertainty from oil price movements is now seen to heighten volatility in financial markets by unsettling investor risk appetite and unseating inflation expectations. further, a continued decline in oil price could also change the balance of global growth prospects. there will be winners and losers if low oil prices persist. while the decline in oil is a dampener to inflation and could raise purchasing power for oil importers, it could also result in a loss of revenues for oil producers and lead to weak aggregate demand. with overall global growth still fragile, the significant drop and the weak prospects in oil prices have gotten more analysts discussing the risk of deflation in recent weeks. the philippines in focus : how do we see all these impacting the philippines? for us, low oil prices represent disinflation pressures. fuel and fuel - related items account for nearly 9 pct of our cpi basket. we have also seen transport fares being adjusted downward. in addition, the fall in oil prices could benefit us through an increase in household real income as well as the lower cost of production. i have been asked whether we are worried about deflation ( due to the substantial decline in oil prices ). well, deflation effects in the aes can spillover to our economy through lower trade. however, trade as a percentage of gdp is still relatively lower than those of our peers in the region. 1 so the risk here is probably only of a relatively small magnitude. as for deflation materializing in the philippines, the risk is not significant. for one, our demand conditions are firm. services and industry remain strong. and on the demand side, consumption is seen remaining robust. we heard sec. balisacan say yesterday that “ the worst is over on underspending ” and that the government is committed to ramping up spending. there are other factors that lead us to say that deflation is remote – or that note : trade value ( exports plus imports ) relative to gdp is low for the philippines as compared to most of our regional peers.