PH Balance of Payments to Stay in Deficit Through 2026

The Philippines’ balance of payments (BOP) is projected to remain in deficit over the next two years, signaling sustained reliance on external financing amid global uncertainty, according to the Bangko Sentral ng Pilipinas (BSP).

The BSP forecasts a BOP deficit of about 1 percent of gross domestic product (GDP) in both 2025 and 2026, reflecting the lingering current account shortfall and weakened capital inflows.

“While our domestic fundamentals remain solid, the external environment presents multiple headwinds—from soft global trade to elevated geopolitical tensions,” the central bank said.

The current account, which tracks the country’s trade and income with the rest of the world, is expected to remain in deficit at roughly 3 percent of GDP.

This gap indicates the country is importing more than it exports and investing more than it saves—necessitating foreign financing to sustain infrastructure spending and investment-driven growth.

Goods exports remain challenged by declining global demand, competitiveness issues, and persistent bottlenecks in the semiconductor sector.

Though trade diversion offers marginal gains, ongoing logistical hurdles and labor constraints hamper broader export recovery.

Conversely, imports are supported by infrastructure projects and robust domestic consumption but are softened by declining commodity prices, especially for oil.

The services trade offers a partial buffer, as business process outsourcing (BPO) revenues and tourism receipts remain strong.

BPO earnings are buoyed by demand for contact center services, while tourism gains from airport upgrades and better accommodation.

Still, these sectors face risks from U.S. job reshoring, talent shortages, and rising travel costs.

Overseas Filipino remittances—projected to hit US$36.5 billion (around PHP2.08 trillion) by 2026—remain a key support for the current account.

Digital transfers and the country’s removal from the Financial Action Task Force’s grey list have eased costs and improved access.

Yet, growing labor protectionism in some host countries poses emerging risks to these flows.

Foreign investment is expected to remain modest despite government reforms, including the CREATE MORE Act and Capital Markets Efficiency Promotion Act.

“Investor sentiment is cautious due to global uncertainties, but we expect long-term confidence to improve with continued reforms,” BSP officials said.

International reserves are projected to stay stable at around US$105 billion, providing a strong buffer against external shocks.

Still, slower trade and investment activity will limit the country’s ability to grow its reserve stockpile.

For ordinary Filipinos, a BOP deficit can affect currency stability, import prices, and foreign borrowing costs.

It underscores the importance of boosting export competitiveness, improving logistics, and sustaining investor trust.

The BSP noted that its forecasts are subject to change based on evolving global developments.

“We will continue to monitor risks closely to maintain price and financial stability,” the BSP said.