BSP warns of wider BOP deficit in 2026

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December 28, 2025 | 12:00am

Amid global headwinds

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) expects the country’s balance of payments (BOP) deficit to widen in 2026 as external headwinds persist, prompting a downward revision in its latest quarterly forecasts.

In a statement, the BSP said the country’s BOP position is projected to post a deficit of $5.9 billion in 2026, equivalent to 1.2 percent of gross domestic product, wider than the $3.4-billion deficit or 0.6 percent of GDP projected in the previous quarter.

The revised figures reflect the BSP’s updated outlook as of the fourth quarter of 2025, replacing projections approved by the Monetary Board in September.

For 2025, the central bank now sees the BOP deficit narrowing slightly to $6.2 billion or 1.3 percent of GDP, compared to an earlier forecast of $6.9 billion or 1.4 percent of GDP.

The BSP said the shift from a modest surplus in 2024 to deficits in 2025 and 2026 “largely reflects a continued current account shortfall arising from a sustained trade-in-goods gap and weaker services receipts.”

The central bank noted that goods trade is expected to remain soft, shaped by weaker global demand, easing commodity prices and slower domestic growth momentum.

While frontloading ahead of potential US tariffs provided a temporary boost to merchandise exports in 2025, the BSP said “structural constraints – including logistical bottlenecks, skills mismatches and high input costs – also continue to weigh on export competitiveness.”

Under the revised forecasts, goods exports are projected to reach $61.2 billion in 2026, up from $56.2 billion previously, but import growth is also expected to accelerate, with goods imports seen rising to $130.2 billion from $126.4 billion. This keeps the trade balance under pressure and contributes to the wider external gap.

Services exports are likewise projected to moderate. The BSP said growth is constrained by higher costs relative to competitors in both the business process outsourcing and tourism sectors, citing expenses such as rental fees, utilities, wages, meals and accommodation.

Services exports are now seen at $54.7 billion in 2026, slightly lower than earlier expectations, while services imports are unchanged at $42.3 billion.

The current account deficit is projected at $15.3 billion in 2026, or three percent of GDP, wider than the $15.5 billion or 2.9 percent of GDP previously projected.

For 2025, the BSP sees the country’s current account deficit at $15.5 billion, or 3.2 percent of GDP, narrower than the $16.4 billion, or 3.3 percent of GDP, expected a quarter ago.

Cash remittances, however, are expected to remain resilient at $35.5 billion in 2025 and $36.6 billion in 2026, supported by strong global labor demand and sustained use of formal transfer channels. The BSP said the impending US tax on remittances is “expected to pose minimal impact.”

On the financial account, the BSP revised its 2026 forecast to a $11.7-billion deficit, narrower than the earlier $14.4-billion estimate, reflecting adjustments in portfolio and direct investment flows.

Net foreign direct investment liabilities are now projected at $7.5 billion in 2026, lower than the previous $8 billion forecast, while net foreign portfolio investment liabilities are seen at $5.6 billion, slightly higher than earlier estimates.

The BSP said foreign direct investments are expected to ease from 2024, reflecting cautious market sentiment and heightened global financial volatility.

Despite the wider deficit outlook, gross international reserves are projected to remain adequate at $109 billion in 2025 and $110 billion in 2026, providing what the BSP described as “a strong buffer against external liquidity risks.”

Based on the latest results from early warning systems on currency crisis and debt sustainability, the BSP said “the Philippines remains resilient to external shocks as of the fourth quarter of 2025.”

“Manageable external financing needs and ample level of reserves continue to support external sector resilience,” the central bank said.

“The BSP will continue to engage proactively with external stakeholders and promote macroeconomic stability, closely monitoring emerging risks that impact the external sector,” it added.