The Philippines has reported its largest dollar surplus in nearly four years, highlighting a remarkable recovery in its balance of payments (BOP). In September, the BOP position revealed a surplus of $3.5bn, a striking turnaround from the $414mn deficit recorded in the same month last year, according to the Bangko Sentral ng Pilipinas (BSP). This significant surplus has propelled the cumulative BOP surplus for the first nine months of 2024 to $5.1bn, already surpassing the BSP's annual forecast of $2.3bn, as reported by The Inquirer. 

The robust surplus can largely be attributed to substantial inflows from new foreign borrowings and the BSP’s successful overseas investments. In particular, the recent global bond sale conducted by the Marcos administration injected $2.5bn into the central bank, significantly bolstering the country’s dollar resources. The BOP is a crucial indicator, summarising the economy's transactions with the rest of the world; a surplus occurs when foreign funds entering the economy exceed those leaving.

The impressive September surplus marks the largest since the $4.2bn windfall in December 2020, a time when the nation was grappling with the adverse effects of the pandemic. At that time, the surplus stemmed from increased foreign debt taken on to fund pandemic responses while import demand waned. However, the current context reflects a more stable economic environment both locally and globally.

In addition to the influx from foreign borrowings, the BSP’s international investments have also played a pivotal role in achieving this surplus. The bank announced that its BOP position in September has contributed to an all-time high in gross international reserves (GIR), now standing at $112.7bn. These reserves are critical as they provide a buffer against economic shocks, allowing the country to navigate periods of low export earnings or foreign investment.

The GIR is considered sufficient if it can cover at least three months' worth of imports; currently, the Philippines' reserves can finance 8.1 months of imports, further strengthening its economic resilience. With this encouraging surplus and robust reserves, the Philippines appears well-positioned to manage potential external economic challenges ahead.