By Luisa Maria Jacinta C.Jocson,Reporter
THE BANGKO SENTRAL ng Pilipinas (BSP) foresees that the nation’s balance of payment (BoP) position will shift to a deficit this year, alongside a broader current account deficit, primarily attributable to fluctuations in global trade.
“The Philippine BoP position is anticipated to be less stable in 2025-2026 due to a decline in global trade and diminished investor confidence resulting from increased unpredictability in global trade regulations and geopolitical situations,” it stated in a declaration late on Monday.
“However, the forecast still indicates ongoing growth in the domestic economy, bolstered by declining inflation and a more lenient monetary policy.”
The latest estimates from the central bank reveal that the total BoP will show a deficit of $4 billion this year, which equates to -0.8% of gross domestic product (GDP).
This represents a shift from an earlier prediction of a $2.1-billion surplus (0.4% of GDP) for 2025.
In 2024, the BoP position recorded a surplus of $609 million, plummeting by 83.4% from the $3.672-billion surplus at the close of 2023.
The BoP offers insight into the country’s transactions with the global market. A deficit indicates that more capital exited the economy, while a surplus denotes that more funds entered than exited.
The BoP deficit is projected to increase to $4.3 billion in the following year but will still be at -0.8% of GDP.
“In 2026, the overall BoP is expected to continue showing a deficit, aligning with the anticipated widening of the current account deficits compared to the 2025 prediction,” said the BSP.
The central bank noted that consistent net inflows in the financial account will bolster the BoP forecast for the next year, while highlighting ongoing risks, such as trade uncertainties, sluggish global growth, and geopolitical strife.
“The total BoP position is projected to display a deficit in 2025 and 2026, with a growing current account gap caused by an increased goods trade deficit and decreased net income in trade-in-services,” the BSP stated.
Meanwhile, the current account deficit — which encompasses transactions regarding goods, services, and income — is anticipated to reach $19.8 billion this year, representing -3.9% of economic output.
This figure is wider than the previously estimated $12.1-billion current account deficit (-2.4% of GDP).
For 2026, the current account deficit is expected to hit $21.2 billion (-3.9% of GDP).
Recent data from the BSP indicated that the current account deficit expanded by 41.4% to $17.5 billion last year from $12.39 billion in 2023.
This also marked the second-largest current account deficit on record, following the $18.3-billion gap noted in 2022.
MODEST EXPORTS GROWTH
Meanwhile, the BSP reduced its goods exports growth estimate to 1% this year from 4% previously. It predicts goods exports will increase by 2% next year.
“Merchandise exports are expected to show modest growth in 2025 and 2026 after two successive years of decline in 2023 and 2024.”
“Semiconductor exports will experience stagnant growth in 2025, primarily due to the ongoing inventory adjustment and the industry’s need to align with the swiftly changing global demand.”
The BSP also revised its projection for goods imports growth downward to 4% from 5% previously. Goods imports are anticipated to increase by 4% in 2026.
Service exports’ growth was also downgraded to 8% from 10% earlier. The BSP expects service exports to grow by 8% next year.
It stated that service exports are anticipated to show a “modest increase” despite weaker business process outsourcing (BPO) services.
“The outlook for BPO services considers the detrimental effects of the US job reshoring agenda, along with domestic challenges in the availability of skilled workers in Generative AI and data analytics.”
This could “impede industry efforts to ascend the value chain and sustain competitiveness,” it added.
BPO revenues are projected to grow by 5% this year and in 2026. This figure is slightly lower than the previous estimate of 6% for 2025.
Travel receipts are expected to increase by 11% this year, significantly slower than the earlier prediction of 20%.
“Growth in Philippine tourism activity is expected to revert to its pre-pandemic trajectory, bolstered by the ongoing influx of international tourists, particularly from Korea and Japan,” it added.
Conversely, the BSP predicts that service imports growth will accelerate to 14% this year from 8% previously. Its growth forecast for 2026 is set at 12%.
“Overseas Filipino (OF) remittances are expected to rise slightly below the long-term trend as significant OF host countries, like Saudi Arabia and Qatar, increasingly push for the localization of their workforce, affecting OFWs’ (overseas Filipino workers) deployment opportunities,” it mentioned.
The central bank has also reduced its cash remittance growth prediction to 2.8% this year from 3% beforehand. Cash remittances are projected to increase by 3% next year.
Nevertheless, the stricter immigration regulations in the United States are expected to have a negligible impact on remittance flows, according to the central bank.
“Most Filipinos based in the US are either permanent residents or documented migrants, and less than 1% of the total land-based OFWs are deployed in the US.”
Meanwhile, the BSP stated that the financial account will be “supported by sustained net inflows from both foreign direct and portfolio investments.”
“Investor interest will be encouraged by the nation’s macroeconomic principles, paired with ongoing reforms aimed at enhancing the ease of doing business, optimizing tax incentives, and improving capital market efficiency.”
Financial account outflows could reach $16.2 billion this year and $17.8 billion in 2026.
The financial account reflects transactions between residents and non-residents involving financial assets and liabilities.
The country’s removal from the Financial Action Task Force “gray list” will also enhance investor confidence, the BSP stated.
“However, investment gains may be moderated by a stall in US monetary easing, which could limit capital flows to emerging market economies, including the Philippines,” it added.
The BSP also lowered its foreign direct investment inflow forecast to $9 billion in 2025 from $10 billion earlier.
Conversely, the net foreign portfolio investment projection was raised to $3.9 billion from $3.1 billion.
“The nation’s gross international reserves (GIR) level is anticipated to experience a slight decline in 2025 and 2026 compared to 2024, reflecting diminished foreign exchange inflows from the exports of goods and services, as well as investments.”
The GIR is expected to reach $105 billion for this year, lower than the previously projected $110 billion.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort remarked that the deteriorating BoP outlook was influenced by US President Donald J. Trump’s tariff policies, which could suppress global growth, investments, and trade.
“As a consequence of all these factors, Philippine exports might decelerate amidst slower global trade, possibly widening the national trade deficit and, consequently, the current account deficit,” he stated.
Mr. Ricafort mentioned that foreign direct investments might decelerate due to Mr. Trump’s “America first” policies, while foreign portfolio investments could experience increased market volatility.
“A softer global GDP could also hinder growth in BPO and other services export revenues, as well as reduce foreign tourism revenues,” he remarked.
OUTLOOK
Meanwhile, the BSP stated that domestic growth possibilities could “provide a buffer against global challenges.”
“Domestic expansion propelled by private consumption, investments, including government infrastructure expenditure, along with ongoing advancements in legislative reforms to enhance the business climate, should foster foreign investments and positively influence the external sector outlook in the near to medium term.”
The government estimates growth to fall between 6% and 8% this year and in 2026.
Earlier, the BSP indicated that it expects GDP to stabilize near the lower limit of the targeted range from this year to the next.
The central bank stated that global economic growth is projected to remain weak from this year to the following year amidst the United States’ uncertain trade policies.
“Global growth prospects are anticipated to be further subdued by multiple factors, including the ongoing weakness in the Chinese economy, extended geopolitical strife in conflict areas of the Middle East and Eastern Europe, and fluctuations in commodity prices.”
