The country’s balance of payments (BOP) position for the fourth quarter of 2024 shifted to a deficit of USD4.5 billion, a stark contrast from the USD1.9 billion surplus recorded in the same period of 2023. This reversal, primarily attributed to a widening current account deficit and net outflows in the financial account, signals potential challenges for the country’s ability to manage trade and debt obligations.
In the fourth quarter, the current account deficit ballooned to USD4.6 billion (3.5 percent of GDP), a 339.3 percent increase from the USD1.0 billion deficit in Q4 2023. This surge was largely driven by a growing merchandise trade gap, lower receipts from trade in services, and a decline in primary income accounts. Despite a partial offset from increased secondary income, the larger deficit points to mounting pressure on the country’s external balance.
Meanwhile, the financial account shifted from a surplus of USD6.2 billion in Q4 2023 to net outflows of USD2.9 billion in 4Q 2024. This reversal, driven by net outflows in both portfolio and other investment accounts, highlights a shift in foreign capital flows. Although direct investment inflows increased, the overall tr percentend of outflows raises concerns over the Philippines’ capacity to fund its external liabilities.
For the full year 2024, the country posted a BOP surplus of USD609 million, a significant decrease from USD3.7 billion in 2023, mainly due to the persistent current account deficit. The current account deficit for 2024 widened by 41.4 percent, reaching USD17.5 billion (3.8 percent of GDP), exacerbated by trade imbalances and declining service receipts.
Despite these challenges, the country’s gross international reserves (GIR) reached USD106.3 billion by year-end, up from USD103.8 billion in 2023, providing a buffer against external pressures. However, with the peso depreciating by 2.9 percent for the year, the country faces a complex economic environment in terms of managing trade balances and servicing foreign debt.
The developments in the balance of payments, along with fluctuations in the exchange rate, underscore the need for vigilance in maintaining foreign reserves and managing external obligations. The Bangko Sentral ng Pilipinas (BSP) will likely play a key role in stabilizing these dynamics in 2025.
