Philippine BOP swings to deficit in 2025

The Philippines’ balance of payments posted a deficit of USD 5.7 billion in 2025, reversing the USD 609 million surplus recorded in 2024, as softer financial account inflows outweighed gains from exports, remittances, and business process outsourcing receipts, according to the Bangko Sentral ng Pilipinas.

BSP said the 2025 deficit was equivalent to 1.2 percent of gross domestic product, compared with a 0.1 percent surplus a year earlier.

The central bank said the weaker full-year outcome reflected tighter global financial conditions, increased resident investment in foreign-issued debt securities, slower foreign loan availments by domestic banks, and more moderate net inflows of foreign direct investments.

Even so, the current account deficit narrowed to USD 16.3 billion in 2025 from USD 18.6 billion in 2024, improving to 3.3 percent of GDP from 4.0 percent.

That improvement was driven mainly by a smaller trade-in-goods gap and higher receipts from overseas Filipinos, while the BPO sector remained a steady source of export earnings as global demand for digital and outsourcing services stayed firm.

For the year, the trade-in-goods deficit narrowed 3.2 percent to USD 66.7 billion from USD 68.9 billion as exports grew faster than imports.

Goods exports rose 15.2 percent to USD 63.411 billion in 2025 from USD 55.056 billion in 2024.

The increase was led by electronic products, which climbed to USD 25.202 billion from USD 20.998 billion, other manufactures to USD 7.276 billion from USD 5.991 billion, gold to USD 2.371 billion from USD 1.348 billion, machinery and transport equipment to USD 3.550 billion from USD 2.644 billion, and other mineral products to USD 3.803 billion from USD 3.006 billion.

BSP said export growth was supported by sustained global demand for semiconductors, electronic data processing equipment, and technology components used in artificial intelligence, smart-device ecosystems, and electric vehicles.

The central bank added that the Semiconductor and Electronics Industries in the Philippines Foundation continued pushing its industry roadmap, which targets exports of USD 110 billion by 2030 and proposes a front-end wafer laboratory to deepen local semiconductor capability.

Imports of goods increased 5.0 percent to USD 130.081 billion in 2025 from USD 123.920 billion in 2024.

The rise was driven mainly by telecommunication equipment and electrical machinery, which reached USD 16.956 billion from USD 13.874 billion, passenger cars and motorized cycle imports, which rose to USD 6.877 billion from USD 5.988 billion, animal and vegetable oils and fats, which increased to USD 2.222 billion from USD 1.510 billion, metal products, which climbed to USD 3.286 billion from USD 2.624 billion, and power-generating and specialized machines, which rose to USD 8.134 billion from USD 7.524 billion.

BSP said continued digital infrastructure investment, including broadband networks, data centers, and transmission systems, helped lift import demand, while the government’s zero-tariff incentive on electric vehicles supported purchases of passenger cars, motorcycles, and electric mopeds.

Net receipts from services fell 4.5 percent to USD 13.246 billion in 2025 from USD 13.872 billion in 2024 because growth in service imports outpaced service exports.

Still, services exports edged up 1.6 percent to USD 51.486 billion from USD 50.671 billion, while services imports rose 3.9 percent to USD 38.240 billion from USD 36.799 billion.

BSP said BPO export revenues, including computer and other business services, reached an estimated USD 33.5 billion in 2025, up 4.8 percent from USD 32.0 billion in 2024.

Net receipts in primary income slipped 6.1 percent to USD 4.451 billion in 2025 from USD 4.739 billion in 2024.

Primary income receipts rose 0.7 percent to USD 17.682 billion from USD 17.553 billion, but payments increased 3.2 percent to USD 13.230 billion from USD 12.814 billion.

BSP attributed the decline mainly to higher dividend payments to direct investors and increased interest payments on nonresidents’ portfolio investments, although gains from compensation inflows of short-term resident overseas Filipino workers and higher reserve-asset income partly cushioned the drop.

Net receipts in secondary income rose 3.1 percent to USD 32.682 billion in 2025 from USD 31.687 billion in 2024.

That increase was supported by record-high remittances from nonresident overseas Filipino workers, which grew 3.3 percent to USD 30.8 billion, while personal remittances increased 3.3 percent to USD 39.619 billion from USD 38.341 billion.

Cash remittances coursed through banks also rose 3.3 percent to USD 35.634 billion from USD 34.493 billion.

The capital account posted net receipts of USD 89 million in 2025, up 40.7 percent from USD 63 million in 2024, mainly due to higher receipts from the disposal of nonproduced nonfinancial assets such as patents, trademarks, and copyrights.

On the financial account, net inflows declined to USD 10.887 billion in 2025 from USD 19.064 billion in 2024.

Direct investment net inflows eased 7.6 percent to USD 6.189 billion from USD 6.700 billion.

BSP said net FDI declined 17.1 percent as nonresident placements in debt instruments weakened amid geopolitical developments, policy uncertainty, and softer capital spending in some sectors.

The central bank said equity capital placements came mostly from Japan, the United States, and Singapore, and were channeled mainly to manufacturing, wholesale and retail trade, and financial and insurance activities.

The portfolio investment account reversed to net outflows of USD 1.297 billion in 2025 from net inflows of USD 3.528 billion in 2024.

BSP said that reversal reflected a sharp increase in residents’ investments in foreign-issued debt securities, which jumped to USD 4.6 billion in 2025 from USD 430 million in 2024, along with lower nonresident placements in National Government long-term bonds because there were no additional long-term bond issuances during the period.

Net inflows of other investments moderated 29.7 percent to USD 6.020 billion from USD 8.566 billion.

BSP said the decline came mainly from local banks’ net repayments of foreign loans and reduced net foreign loan availments by the National Government, partly tempered by lower resident placements of currency and deposits abroad.

Trading in financial derivatives posted a net loss of USD 25 million in 2025, reversing the USD 271 million net gain recorded in 2024.

In the fourth quarter alone, the balance of payments position improved sharply, with the deficit narrowing to USD 346 million from USD 4.5 billion in the same period a year earlier.

BSP said the fourth-quarter deficit was equivalent to 0.3 percent of GDP, better than the 3.5 percent deficit posted in Q4 2024.

The central bank attributed the quarterly improvement to a 49.5 percent narrowing in the current account deficit and a reversal of the financial account from net outflows to net inflows.

The current account deficit in the quarter eased to USD 2.5 billion from USD 4.9 billion a year earlier, while the goods deficit narrowed to USD 16.1 billion from USD 18.7 billion.

Quarterly goods exports surged 23.8 percent to USD 15.826 billion from USD 12.780 billion, while imports rose a modest 1.3 percent to USD 31.935 billion from USD 31.516 billion.

Among quarterly exports, electronic products jumped to USD 7.005 billion from USD 3.750 billion, machinery and transport equipment rose to USD 1.041 billion from USD 687 million, gold climbed to USD 637 million from USD 413 million, bananas increased to USD 511 million from USD 336 million, and desiccated coconut exports rose to USD 144 million from USD 81 million.

Among quarterly imports, telecommunication equipment and electrical machinery rose to USD 4.736 billion from USD 3.831 billion, iron and steel increased to USD 1.305 billion from USD 1.103 billion, power-generating and specialized machines climbed to USD 1.965 billion from USD 1.787 billion, metal products rose to USD 800 million from USD 653 million, and professional, scientific, and control instruments, including photographic equipment and optical goods, increased to USD 697 million from USD 551 million.

Net receipts from services in the quarter rose to USD 4.083 billion from USD 4.004 billion, while primary income receipts fell to USD 765 million from USD 1.430 billion and secondary income rose to USD 8.789 billion from USD 8.408 billion.

BSP said quarterly cash transfers from nonresident overseas Filipino workers increased 3.6 percent to USD 8.3 billion, with December 2025 remittances hitting a record USD 3.5 billion on seasonal bonuses and holiday spending.

The capital account posted a quarterly surplus of USD 21 million, up from USD 16 million in Q4 2024.

The financial account registered a modest net inflow of USD 29 million in Q4 2025, a turnaround from net outflows of USD 1.2 billion in Q4 2024.

Quarterly direct investment net inflows moderated to USD 1.269 billion from USD 2.808 billion, while portfolio investment net outflows eased to USD 1.521 billion from USD 2.829 billion.

Other investments shifted to net inflows of USD 279 million in Q4 2025 from net outflows of USD 1.310 billion a year earlier, while financial derivatives posted net gains of USD 2 million, down from USD 163 million.

Gross international reserves stood at USD 110.8 billion as of end-December 2025, higher than USD 106.3 billion a year earlier and up from USD 109.1 billion at end-September 2025.

At that level, BSP said the reserves were enough to cover 7.3 months of imports of goods and payments of services and primary income, and were equivalent to 4.1 times the country’s short-term external debt based on residual maturity.

The central bank said the annual increase in reserves reflected the National Government’s net foreign currency deposits with the BSP, including proceeds from its issuance of ROP Global Bonds, upward adjustments in the BSP’s gold holdings and foreign-currency-denominated reserve assets, and BSP income from investments abroad.

By asset component, foreign investments made up 78.4 percent of reserves, gold accounted for 16.8 percent, Special Drawing Rights for 3.6 percent, reserve position in the fund for 0.7 percent, and foreign exchange for 0.6 percent.

The peso averaged PHP 58.70 against the US dollar in Q4 2025, weaker than PHP 57.11 in Q3 2025 and PHP 58.17 in Q4 2024.

For the full year, the peso averaged PHP 57.51 per US dollar in 2025, compared with PHP 57.30 in 2024.

BSP said the peso depreciated 2.7 percent quarter on quarter and 0.9 percent year on year in Q4, while the full-year depreciation was 0.4 percent.

The central bank attributed the peso’s weakness in the fourth quarter to a strong US dollar amid geopolitical uncertainty, even after a 50-basis-point rate cut by the US Federal Reserve, alongside slower domestic growth, expectations of BSP rate cuts, and concerns over the infrastructure spending controversy.

Even with those pressures, BSP said stronger exports, steady remittances, BPO inflows, and sustained FDI partly cushioned the strain on the country’s external accounts.

Exchange-rate volatility eased in Q4 2025, with the standard deviation of the peso’s movement against the US dollar at PHP 0.36, lower than PHP 0.45 in Q3 2025 and PHP 0.76 in Q4 2024.

The peso also depreciated against the baskets of currencies of major trading partners, trading partners in developing countries, and trading partners in advanced countries in both nominal and real terms in Q4 2025 and in the full year, which BSP said made Philippine exports more price-attractive in global markets.

In year-on-year terms, the nominal effective exchange rate fell 2.0 percent for major trading partners, 2.7 percent for advanced-country partners, and 1.6 percent for developing-country partners in Q4 2025.

For the full year, the nominal effective exchange rate declined 1.2 percent for major trading partners, 1.7 percent for advanced-country partners, and 0.9 percent for developing-country partners.

The real effective exchange rate fell 2.0 percent for major trading partners, 3.6 percent for advanced-country partners, and 1.2 percent for developing-country partners in Q4 2025.

For January to December 2025, the real effective exchange rate declined 1.1 percent for major trading partners, 2.8 percent for advanced-country partners, and 0.2 percent for developing-country partners.

The balance of payments, a broad measure of the country’s transactions with the rest of the world, tracks trade, income, transfers, investments, and loans, and is closely watched because it influences currency stability, reserve adequacy, and the economy’s capacity to absorb external shocks.