Reduced forecasts for 2025 and 2036 by BSP (Bangko Sentral ng Pilipinas)
The Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, has recently revised its balance of payments (BOP) projections for the years 2025 and 2026, taking into account global uncertainty, heightened geopolitical risks, and investor confidence on the BOP outlook.
According to the BSP, several factors are influencing the balance of payments deficit for the Philippines in the coming years.
One of the main factors is the widening trade deficit. The Philippines recorded a trade deficit of about USD 4.1 billion in March 2025, an increase from USD 3.4 billion in the same month of the previous year. This was primarily due to imports rising faster than exports. Projections indicate that the trade deficit could reach around USD 4.8 billion by the end of 2025 and trend near USD 5 billion in 2026, putting pressure on the overall balance of payments.
Another factor is the expansion of the fiscal deficit. The national government's fiscal deficit widened to 7.3% of GDP in Q1 2025, driven by increased spending on infrastructure, social protection, interest payments, and allocations to local governments. This higher deficit may affect external financing needs, influencing the balance of payments.
The strong Philippine peso, supported by softer-than-expected domestic inflation and monetary easing by the BSP, is also a significant factor. Lower inflation and anticipated policy rate cuts (totaling around 75 basis points in 2025) reflect the BSP’s efforts to stimulate growth and improve export competitiveness amid below-target economic growth. However, the strong peso can dampen export competitiveness, affecting the trade balance component of the payments deficit.
Slower-than-expected economic growth is another factor to consider. GDP growth in Q1 2025 was 5.4%, below the government's 6-8% target, causing the BSP to consider monetary easing. Slower growth can reduce export volumes and remittances, impacting the current account and the balance of payments.
Despite these challenges, the domestic economy benefits from steady growth, low inflation, and ongoing structural reforms. The government's push for accelerated infrastructure development, expanded fiscal incentives, and investment-enhancing reforms is expected to help attract long-term investment.
In terms of specific projections, imports are forecast to grow by one percent in 2025 and two percent in 2026. Tourism receipts are likely to increase by 10 percent in 2025 and 11 percent in 2026. Overseas Filipino remittances are projected to increase by 2.8 percent in 2025 and three percent in 2026. Services exports are likely to expand by six percent this year and further accelerate to eight percent in 2026. Goods export is forecast to decline by one percent this year and grow by two percent in 2026.
For 2026, the BSP expects the BOP to register a lower deficit of US$ 2.8 billion. However, the BOP outlook reflects a continued current account shortfall and moderating financial flows, with the current account expected to remain in deficit at around three percent of gross domestic product for both 2025 and 2026.
The rise of protectionist policies in some host countries presents emerging risks for foreign investment inflows. The BOP is a summary of economic transactions between a country and the rest of the world. The BSP's revised projections aim to provide a clear understanding of the economic landscape and guide policy decisions to mitigate risks and foster sustainable growth.
The government's fiscal deficit expansion, attributable to increased infrastructure and social spending, could influence the balance of payments by heightening external financing needs.
The Philippine government's ongoing structural reforms, including investment-enhancing measures, may attract long-term investment and contribute favorably to the balance of payments, offsetting some of the pressures from other factors.
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