BSP expects wider BOP gap

Deficit seen to hit $6.3 billion this year

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) expects a wider balance of payments (BOP) deficit this year, even as it trimmed its current account deficit forecast and issued a more optimistic external outlook for 2026.

In its latest projections approved by the Monetary Board, the BSP said the country’s BOP shortfall may hit $6.3 billion this year, up sharply from the previous $4 billion forecast in March. This is equivalent to -1.3 percent of gross domestic product (GDP), from an earlier estimate of -0.8 percent.

The BSP attributed the wider 2025 BOP gap to weaker-than-expected financial flows, particularly a lower projection for net foreign direct investments, now seen at $7.5 billion from the previous $9 billion.

“While the domestic economy benefits from steady growth, low inflation and ongoing structural reforms, these are offset by global trade uncertainty, heightened geopolitical risks and weakened investor confidence,” the BSP said.

Latest data from the central bank showed that the BOP position deteriorated further in the first five months of the year, swinging to a $5.82-billion deficit as of end-May. This marked a sharp reversal of the $1.6-billion surplus recorded in the same period last year, as the country grapples with a wide trade gap and higher external debt repayments.

Despite the higher BOP deficit, the current account shortfall for 2025 was revised to a narrower $16.3 billion (-3.3 percent of GDP) from the previous $19.8 billion (-3.9 percent of GDP).

“The current account is expected to remain in deficit at around three percent of GDP, indicating a gap in savings over investment amid global uncertainties,” the BSP said.

“As a result, external financing remains necessary to support the country’s infrastructure-led, investment-driven growth strategy,” it added.

Goods exports are expected to contract by one percent this year, reversing the earlier forecast of one percent growth. Imports are seen rising by just one percent as well, much slower than the four percent growth previously projected.

The central bank cited headwinds from global trade uncertainty, lagging competitiveness and constraints in the semiconductor industry, which could affect export growth. Meanwhile, stable domestic demand and infrastructure spending support import growth, but import value is tempered by declining global commodity prices, particularly for oil.

The BSP also lowered its growth forecast for services exports to six percent from eight percent previously. Business process outsourcing revenues are seen reaching $33.5 billion, while travel receipts are projected at $10.7 billion.

Remittance inflows continue to provide a buffer, with cash remittances expected to grow by 2.8 percent to $35.5 billion this year, unchanged from earlier estimates.

For 2026, the BSP turned more optimistic, lowering its BOP deficit forecast to $2.8 billion, (-0.5 percent of GDP) from the previous $4.3 billion (-0.8 percent). The current account deficit for next year is also expected to shrink to $13.6 billion (-2.5 percent of GDP).

The BSP expects gross international reserves to remain ample at around $104 billion in 2025 and $105 billion in 2026, supporting the country’s external position despite lingering global uncertainties.

“The BSP will continue to closely monitor external developments and risks, and their potential impact on the fulfillment of its objectives for price and financial stability,” it said.