The Philippines posted a balance of payments (BOP) deficit of US$3 billion in the first three months this year, a reversal from the US$238 million surplus posted during the same period in 2024, according to data released by the Bangko Sentral ng Pilipinas (BSP). The deterioration underscores mounting external pressures on the economy, with significant implications for macroeconomic stability and international investor sentiment.
The widening BOP deficit, the BSP said, was primarily driven by a sharp increase in the current account shortfall, which doubled to US$4.2 billion from US$2.1 billion a year earlier. As a share of gross domestic product (GDP), the deficit widened to 3.7 percent in 1Q 2025 from 1.9 percent in the same period last year. This reflected a growing merchandise trade gap amid faster import growth and softer export performance, compounded by lower transport service receipts and increased outbound travel expenses. These were only partially offset by steady remittance inflows from overseas Filipinos.
Despite the current account drag, the financial account offered a cushion, posting net inflows of US$6.7 billion, up 43.2 percent year-on-year. The increase was driven by robust direct and other investment inflows, supported by continued interest in Philippine assets through portfolio investments. The capital account also contributed marginally, registering a US$23 million surplus.
Gross international reserves rose to US$106.7 billion as of end-March 2025, compared to US$104.1 billion a year earlier, helping to maintain external liquidity buffers. Meanwhile, the peso averaged P57.97/US$1 in 1Q, appreciating slightly on a quarter-on-quarter basis but weakening by 3.5 percent year-on-year. The BSP noted improvements in external price competitiveness, with real effective exchange rates showing favorable adjustments against both advanced and developing economy currencies.
The sustained BOP deficit may put pressure on the BSP’s policy stance, with implications for monetary policy and currency management amid volatile global financial conditions. The current account deterioration reflects structural trade challenges and underscores the need for export diversification and productivity enhancements.
Meanwhile, resilient investment inflows signal ongoing international confidence but may become vulnerable to global risk sentiment shifts. The central bank will likely remain vigilant, balancing support for economic growth with maintaining external sector stability.
