Why Philippines' current account is stuck in a 'surplus position'

It averages above 3.7% of GDP.

According to DBS, the current account has been in a surplus position averaging over 3.7% of GDP over the last five years. 

This is due in large part to the surplus in transfer payment (remittance) balance and services balance (driven by increasing success in the business process outsourcing sector) that was more than able to offset the merchandise trade deficit.

Regarding the financial account, improving foreign investor perception about the viability the Philippines as an investment destination has also led to substantial portfolio inflows.

Here's more from DBS:

Coupled with accommodative monetary policy and quantitative easing in the developed markets, the financial account was also in surplus for the most part of the last three years.

As such, it is not surprising that the Philippine stock exchange index and the peso have been pushing higher. 

Excess liquidity in the system can be a threat to financial stability when the cycle turns and inflows turn to outflows. In response to inflows, BSP has been taking measured steps including letting the peso strengthen against the greenback and accumulating foreign reserves.

Since mid-2012, foreign reserves have risen by USD 9bn and stood at USD 85bn in January. With the peso’s nominal effective exchange rate already pushing to multi-year highs, export competitiveness is becoming more of a worry.

With moderate credit growth, no external funding concerns and still-low inflation, BSP will be able to keep rates low to limit excessive speculative inflows.

Several macro-prudential measures have also been introduced including the increasing of capital charges for on-deliverable forwards (NDFs), limiting foreign banks’ exposure to NDFs, tightening of rules for access to the BSP’s special deposit accounts (SDAs) and a reduction in rates for SDAs.

Yesterday, the policy rate was kept unchanged, but the SDA rate was cut by 50bps to 2.50%.