The country’s balance of payments (BOP) position ended in 2024 with a lower-than-projected surplus of $609 million because of an expansion in the trade-in goods deficit and government foreign borrowings.

The Bangko Sentral ng Pilipinas (BSP) had hoped for a higher BOP surplus of $3.5 billion for 2024, an updated forecast announced earlier this month. Last year, the BOP surplus was also higher at $3.672 billion.

The BSP noted that the “decline in the cumulative BOP surplus was due to higher trade in goods deficit, and lower net receipts from trade in services and net foreign borrowings by the NG (National Government).”

“This decline was partly muted, however, by the continued net inflows from personal remittances as well as net foreign portfolio and direct investments,” it added.

Cash remittances as of end-November 2024 stood at $31.11 billion while foreign direct investments net inflows totaled $7.7 billion as of end-October. Meanwhile, foreign portfolio funds amounted to a net outflow of $2.9 billion as of end-November.

For the month of December 2024 only, the country posted a BOP deficit of $1.508 billion, lower compared to the previous month’s $2.276 billion, but a reversal from the same period in 2023 of a $642 million surplus.

The central bank said the December shortfall was due to BSP’s net foreign exchange operations and the government’s withdrawal of deposits with the BSP to pay off its maturing foreign debt.

The BSP also announced the final gross international reserves (GIR) number for 2024 of $106.256 billion, down from end-November’s $108.488 billion but higher compared to 2023’s $103.753 billion.

The latest GIR level is considered an adequate external liquidity buffer equivalent to 7.5 months’ worth of imports of goods and payments of services and primary income, It is also about 3.7 times the country’s short-term external debt based on residual maturity, said the BSP.

For this year, the BSP expects the BOP will remain in surplus of $2.1 billion. 

The BSP said the country’s BOP outlook “remains resilient albeit downside risks dominate.”

It also noted that the stable yet moderating global and domestic economic growth prospects, the slowing inflation trajectory across jurisdictions and the lingering geopolitical and weather shocks as well as possible shifts in US trade and investment policies under the Trump administration are the factors affecting its BOP projections.

The BOP is a summary of the economic transactions of a country with the rest of the world for a specific period. A BOP surplus position means there are more exports or inflows than imports or outflows, while a deficit position is the opposite.

Michael Ricafort, Rizal Commercial Banking Corporation (RCBC) chief economist said the December deficit, one of the largest in over two years, was driven by increased import costs, foreign debt payments, and a volatile peso exchange rate.

"The record high of 59.00 [Philippine pesos to the US dollar] has been respected for more than 2 years already or since September 2022," Ricafort said.

He added that the market volatility stemmed from geopolitical risks and potential protectionist policies following the US presidential election.

Despite the deficit, the country's gross international reserves (GIR) remained above the $100 billion threshold for the 15th consecutive month, ending December 2024 at $106.3 billion.

Ricafort noted that the GIR, while declining month-on-month, still provides a substantial buffer for the Philippine peso and supports the nation's favorable credit ratings.

Positive factors contributing to the country's economic resilience include a total of 0.75 local policy rate cuts in 2024 and continued growth in structural dollar inflows from overseas remittances, business process outsourcing revenues, and foreign investments.

Looking ahead, the economist said that sustained growth in these inflows is expected to improve the BOP and GIR in the coming months.