Members of the Monetary Board, fellow central bankers, special guests, magandang hapon at maligayang pasko sa inyong lahat!
Well, what can I say?! Very energizing and inspiring ang mga special numbers that we have seen. Of course, I have to say that the last number, in particular, is my favorite! And I firmly believe that this bias is shared by Deputy Governors Andy Suratos, Nesting Espenilla, and Diwa Guinigundo as well as Assistant Governor Rene Carreon! And so, once again fellow central bankers, let us show our appreciation… for our wives who performed on our behalf… by giving them a warm round of applause!
Alam ninyo, their dance was a patriotic act on their part. They know that if we ourselves were to practice and aim to be excellent dancers for this Christmas, we will have less time for work. They understand that this year is like no other in terms of internal and external challenges. Indeed, this is a time that calls for cooperation from everyone all around… to do their share for our country.
To us at the Bangko Sentral ng Pilipinas, there is no better time to affirm our love for our country by putting it at the center of our Christmas celebration, the merriest and one of the most meaningful of all occasions.
I therefore consider the theme for this year’s BSP Christmas celebration, “Pinas, Labs Kita”, to be particularly appropriate. It captures the pride that we have for our nation, which gains greater currency during these times as we revert to Pinoy traditions that are central to our celebration of Christmas: the myriad images of our parol, the simbang gabi for the faithful, steamy puto-bumbong and bibingka for the early risers, and the visits of mga inaanak sa mga ninong at ninang.
As we take stock of this year’s events, we are reminded of Filipinos who made their mark on the global stage in 2008: the angelic-faced Charice Pempengco with her powerful voice; youthful Arnel Pineda who is now the lead singer of an iconic rock band; and of course the now legendary Manny Pacquiao who has repeatedly made us proud by winning against seemingly more powerful boxers and emerging as the best pound-for-pound boxer in the world.
Beyond these Filipino celebrities, however, we know about Filipinos in literally every corner of the world who heroically toil quietly, without much fanfare… but who make a positive difference in the lives of the people and communities they serve for the sake of their families here. In the process, they have also become a powerful source of continuing support for our economy and our country. Palakpakan din po natin ang ating mga overseas Filipinos!
But we need not look far for inspiration. I see this everyday at the Bangko Sentral, in the quiet buzz of activities in our offices and departments, where central bankers diligently perform their duties as public servants.
In the face of highly challenging events in 2008, this takes on greater meaning. Indeed, the recent months have proven extremely difficult for the global economy. The crisis that began as a liquidity gridlock in the US financial markets has led to a more generalized distrust in global financial markets, or what some would call a “crisis of confidence.” From its epicenter in the US financial markets, the turmoil has affected the financial centers of Europe and Asia and has not spared emerging markets, even the supposedly stellar performers. More recently, we have seen the global economy start to slow sharply: the negative feedback loop from the financial sector crisis to the real economy is no longer a risk but a reality. Well, because economies seem to invariably swing from fragility to strength and back again to weakness, economics is described as a dismal science.
In 2007, the Philippine economy had one of the best years in decades. 2008 has turned out to be one of the most challenging given the international financial turmoil and the global economic slowdown. While the Philippine economy has been described as an island of calm, it does not mean that we are totally immune to these global developments. Our financial markets have not been spared from the ripple effects of the worsening global financial strains: the peso has generally weakened, credit spreads have widened and stock market activity has fallen, as in most other countries. Some economists believe that 2009 could be even tougher than 2008 once the impact on the real sector take hold as the global financial system sheds off excess fat and other excesses built up through the years.
Against this still unfolding landscape, the BSP has not stood idly by. For one, we cannot afford to be complacent or simply watch from the sidelines. More importantly, that is not the way we do business around here. Rather, we have proactively taken steps to ensure the overall health of the banking system and help provide the environment conducive to economic growth and development through responsible monetary policy, and by ensuring the smooth functioning of the payments and settlements system. Specifically, we have calibrated our monetary policy responses with our eye firmly on the inflation ball. As price pressures have receded particularly in the latter part of this year, we have had greater flexibility in providing support for the growth requirements of the economy amid tight global financial conditions. We have been vigilant in protecting the financial system with the timely closure of banking institutions to safeguard the overall health of banking system. We have also implemented a package of measures to promote the stability of the financial system, such as ensuring that banks have access to adequate peso and dollar liquidity, and by communicating the state of the banking system to the markets. Good communication is important in any occasion but more so in an environment that is characterized by some uncertainty. I am reminded of the view that if there is anything that the markets dislike more than anything, it is uncertainty.
Apart from these measures, our economy is also benefitting from the fruits of previous reform efforts adopted by the BSP. We have earned valuable credibility in managing inflation and promoting a stable environment for business and investment planning as well as consumer spending; through prudent supervision and regulation of the banking system, our banks are now adequately capitalized, with healthy balance sheets, sound risk management, and efficient fund intermediation that are pivotal to supporting durable and robust economic growth.
We therefore face the global headwinds with an underlying belief in the resilience of the Philippine economy. There are important cushions that we can count on to ride us through these difficult times. For one, domestic demand is the major driver of growth of the Philippine economy. This is partly because of demographics, as the Philippines has a young and economically active population. For another, the sources of growth have become more broad-based, with the economy diversifying toward such non-traditional sectors as business process outsourcing, agro-industry, mining, tourism, and services. Moreover, we have reduced our vulnerabilities to the moods and swings of the international financial markets: our arsenal of foreign exchange reserves are at record high levels and our reliance on external financing less. Equally important, there is more buy-in for reforms and we have built a track record of responsible macroeconomic stewardship.
The message is that it has been a tough year and the next year will most likely be challenging—perhaps even more so—but our economy is in a better shape to weather the global storm. This is not our first crisis, nor is it the last. And we come out of each crisis better forewarned, better armed, and better able to withstand the gyrations and the shocks of economic and financial turmoil.
Fellow central bankers, your hard work, dedication and unwavering commitment to excellence in your respective fields are behind these cushions and buffers. Together we have crafted and implemented responsive monetary and banking policies which have empowered us to serve our main stakeholders: the Filipino people.
We have also done this by going beyond the conventional perimeters of our mandates by pursuing our various advocacy programs that have a direct impact on the lives of Filipinos. This is made possible through our comprehensive economic and financial education program that covers 12 millon elementary students, the national lesson in savings that have generated millions worth of support for Tulong Barya Para sa Eskwela, our road shows for millions of overseas Filipinos and their families, microfinance for the millions of entrepreneurial Filipinos who live in poverty, and inclusive banking programs for the unbanked. We also continue to support those who need help through the Gawad Kalinga, medical missions and outreach activities. To protect our environment, we have also been involved in the clean-up of Manila Bay and tree-planting activities and we have signified our commitment to green technology.
We continue to improve the access to credit in the countryside through our award-winning e-rediscounting facility that received the coveted Lingkod Bayan award from the President and the Civil Service Commission. Palakpakan po natin ang MSS of Deputy Governor Guinigundo under which Department of Loans and Credit belongs!
On the development financing front, the BSP and the Philippines were lauded for recent innovations such as mobile phone banking and integrating the principles of microfinance into housing loans, earning citations by publications such as “The Economist” and “Expanding Frontiers”. Of course, the courage of our examiners in our continuing effort to protect the public from unsound banking practices deserve our full support and wholehearted appreciation. Palakpakan po natin ang SES under Deputy Governor Nesting Espenilla for this.
And for PHILPASS, Comptrollership, IT, the continuing improvements in the benefits and training programs as well as facilities of the BSP, let us acknowledge the support of the RMS under Deputy Governor Andy Suratos.
And let us not forget the SPC under Asst Gov Eve Avila which meets our country’s requirements for banknotes and coins, Palakpakan din po natin sila.
The EMS of course under me for the many things it has to do and coordinate, especially with the help of Assistant Governor and General Counsel Juan de Zuñiga. Palakpakan din po natin ang EMS!
And most of all our Monetary Board which has been hard at work in crafting policies and guidance for the banking sector and the Bangko Sentral. Palakpakan din po natin ang Members of the Monetary Board!
Indeed, we have many reasons to rejoice this Christmas. In spite of the twists and turns, the difficulties and complexities of 2008, we did quite well in providing stability to our economy through responsive monetary and banking policies.
I take the time to discuss all these because it is important that we all have a clear understanding of our role as central bankers. We have a mandate, a contract with our people and our country... to do our work in accordance with the values we hold dear: patriotism, integrity, excellence, dynamism and solidarity.
Fellow central bankers, in 2009, we celebrate 60 years of central banking in the Philippines. As I look back to the events leading to the birth of central banking in our country, I was struck by the comments made by one of the lawmakers who had a hand in the crafting of the Republic Act 265 or the Central Bank Act. This is what he said: “We are entrusting to this Central Bank and to the Monetary Board the economic life of our nation.”
Fellow workers, central banking is a function directly linked to the development of our economy and our nation. And it is our duty, our obligation… to ensure that the faith and confidence of our people in the Bangko Sentral remain justified, unshaken and well-deserved. Let us therefore remain faithful to our mandate to provide stability to our economy with our monetary and banking policies, to uphold the law at all times, to run after those who violate and betray the trust of our people in the banking system, and to provide leadership in crafting policies that lead to sustained and balanced economic growth.
As 2008 comes to a close, let me therefore salute each and everyone one of you for the work that you have done this past year. You make me proud to be part of the BSP family. On a personal note, allow me to thank you for the unstinting support you give me as Governor of the Bangko Sentral ng Pilipinas. I can tell you that in the many difficult decisions that I have had to take as head of this worthy institution, I have taken them with confidence knowing that I have the whole BSP community behind these efforts. I am often asked these days whether I sleep soundly at night. I answer in the affirmative without hesitation, because I know that I have good people with me, world-class central bankers actually.
Mabuhay ang Bangko Sentral ng Pilipinas!
Muli, with my wife Elma and our children, I greet all of you, Maligayang Pasko at Masaganang Bagong Taon! | 
