Philippines ends 7-month dollar deficit run in May

MANILA, Philippines — The Philippines ended a seven-month streak of dollar deficits in May, offering a tentative signal that pressures on the country’s external accounts may be starting to ease — though economists caution against reading too much into a single month’s improvement.

Data released by the Bangko Sentral ng Pilipinas showed the balance of payments registered a $131-million surplus last month, the first time dollar inflows exceeded outflows since October 2024.

The reversal, however, only marginally trimmed the country’s cumulative shortfall. The five-month deficit narrowed to $7.28 billion from $7.4 billion through April — but that figure already represents roughly 93 percent of the BSP’s full-year deficit projection of $7.8 billion, and remains 25.19 percent wider than the same period a year ago.

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Trade deficits and portfolio investment outflows continued to weigh on the country’s external position through the first five months, the BSP said, partially cushioned by remittances, foreign borrowings, services trade, and foreign direct investments.

Reserve buffer holds, but falls below year-end target

The one-month surplus was insufficient to replenish the country’s external buffers. Gross international reserves fell to $103.99 billion in May, the lowest since January’s $103.27 billion and well short of the central bank’s $111-billion year-end forecast.

Still, the reserve level covers 6.7 months’ worth of goods imports and services payments — and is equivalent to nearly four times the country’s short-term external debt based on residual maturity, indicating the buffer remains adequate by standard metrics.

Analysts: improvement is tactical, not structural

Carlo Asuncion, chief economist at UnionBank of the Philippines, attributed the May surplus partly to large public-sector foreign exchange inflows layered on top of steady structural dollar earners such as remittances and business process outsourcing receipts.

“This suggests that pressures on the country’s external accounts may be starting to ease, although not yet signaling a full turnaround,” Asuncion said, describing the result as a “tactical improvement” rather than a structural shift.

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He added that underlying vulnerabilities — particularly the chronic trade deficit — remain unresolved despite the monthly uptick.

Robert Dan Roces, group economist at SM Investments, said the result reassures markets on near-term liquidity without resolving longer-term questions.

“External liquidity remains intact, and immediate balance-of-payments risks have softened. The bigger question is whether trade, tourism, remittances, and investment inflows can keep pace as global uncertainty remains elevated,” Roces said.

Geopolitical spillovers weighed on dollar supply

The Philippines’ external position had come under intensifying strain following the escalation of the US-Israel-Iran conflict earlier this year. Rising global oil prices forced the country — a net energy importer — to spend more dollars on fuel, while investor risk aversion triggered capital outflows from Philippine equities and pushed the peso to record lows beyond the 61-to-a-dollar threshold.

Some of those pressures may now ease following the signing of a US-Iran memorandum of understanding aimed at ending the conflict.

The BSP has separately projected that the full-year BOP deficit could widen further to $8.5 billion, or about 1.6 percent of gross domestic product, in 2027.

READ: PH dollar deficit swells to over one-year high on Middle East crisis

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