MANILA, Philippines -- The country's foreign exchange surplus shrunk to $42 million in May, a fraction of the hefty $665-million surplus in the same month in 2007, given the more challenging global economic environment marked by skyrocketing fuel and food prices.

The balance of payments (BOP) surplus in May brought the five-month surplus to $2.2 billion, not too far from the $2.36-billion surplus chalked up in the same period in 2007, Bangko Sentral ng Pilipinas (BSP) governor Amando Tetangco Jr. said Monday.

"This was achieved on account of continued foreign exchange inflows from overseas Filipino remittances, merchandise exports, net foreign direct investment and net investment income of the BSP," Tetangco said.

The BOP measures foreign exchange transactions between the domestic economy and the rest of the world. Any transaction which gives rise to a payment by a Philippine resident like importation or debt servicing is a deficit item in the BOP while any transaction which gives rise to a receipt like borrowing, exporting or overseas Filipino remittance is a surplus item.

The surge in oil and food prices in 2008 has weighed down on the external payments account of the Philippines, a net importer of oil and the world's large importer of rice.

Inflows of foreign investments also slowed down compared to 2007, although monthly remittances from overseas Filipinos through banks remained above $1.0 billion.