The Philippines is forecast to post balance of payments (BOP) deficits equal to around 1 percent of local output, measured as the gross domestic product (GDP) in both 2025 and 2026, reflecting persistent external currency outflows that exceed inflows.
According to the Bangko Sentral ng Pilipinas (BSP), the deficits stem primarily from a continued current account shortfall, projected at about 3 percent of GDP, as investment needs outpace domestic savings amid global uncertainty.
Although domestic fundamentals remain strong, with stable growth, low inflation, and ongoing structural reforms, the BSP said the country’s external position faces sluggish goods exports, moderating financial flows, and geopolitical risks. Export performance remains weak due to trade frictions, semiconductor constraints, and competitiveness issues, while import demand stays firm, driven by infrastructure spending and domestic consumption, albeit softened by lower global commodity prices.
Resilient services trade, steady remittances, and positive—but cautious—foreign investment inflows help buffer the deficits. The removal of the Philippines from the FATF grey list and digital remittance innovations have lowered transfer costs, while fiscal incentives and investment reforms aim to bolster long-term capital inflows. However, the BSP notes that global investor sentiment remains cautious.
With trade and capital flows moderating, the country’s ability to build foreign exchange reserves is constrained, although reserves are expected to remain adequate. The BSP underscored its commitment to monitoring external developments and maintaining policy support for macroeconomic stability, while cautioning that downside risks remain elevated.
