‘Current account gap could swell to $21 billion‘

MANILA, Philippines — The Philippines’ current account deficit could widen to $21 billion this year from $16.3 billion last year, due to the  economic fallout from the ongoing  Middle East crisis, according to Bank of America (BofA) Global Research.  

In a report, the bank warned that the country’s current account gap could swell to 4.1 percent of gross domestic product (GDP) in 2026, wider than government forecasts.

Before the Middle East conflict broke out in late February, the Philippines had been on track for a moderate growth, with inflation easing and fiscal and external deficits narrowing, the report said.

“Fast forward to May 2026 and the combo of slower GDP growth and higher inflation is apparent. What may be less obvious is a sharply wider current account deficit forthcoming,” the bank said.

BofA estimates the Philippine economy will grow by just two percent this year, well below the government’s five to six percent target.

Data from the Bangko Sentral ng Pilipinas (BSP) showed the current account gap declined by 12.3 percent to $16.3 billion in 2025, equivalent to 3.3 percent of GDP.

For this year, the BSP had earlier anticipated an improvement in the country’s current account deficit to $13 billion (three percent of GDP). However, the Middle East conflict made this complicated.

Now, the central bank projects that the current account position may worsen to a $20.3-billion deficit this year or four percent of GDP.

BofA said that with oil prices seen averaging $92.5 per barrel this year, up from pre-war levels of $65 per barrel, the Philippines’ trade deficit would inevitably widen, and then drag the current account deeper into the red.

“We think a larger CA deficit may have partly driven the wider BOP (balance of payments) gap in the first quarter of 2026,” it said.

Cumulative BOP deficit widened by 34.2 percent to $7.41 billion during the January to April period from last year’s $5.52-billion shortfall.

Although remittances and trade, key components of the current account, are growing more slowly, the bank noted that the rebound in tourist arrivals and receipts could positively influence the current account position in 2026, as the sector has shown an unexpected pickup. However, this lift may be modest, as tourist receipts are only around $9 billion annually, it said.