More dollars to flow out of PH economy thru 2026 due to global headwinds — BSP

The Bangko Sentral ng Pilipinas (BSP) has revised its outlook for the country’s balance of payments, projecting a wider deficit in both 2025 and 2026 due to continued global trade uncertainty, geopolitical tensions, and softer external demand.

In a press release issued Monday, March 24, 2025, the BSP said the external sector is expected to remain under pressure even as domestic economic conditions continue to improve. The balance of payments deficit is forecast to reach $4 billion in 2025 and $4.3 billion in 2026, or -0.8 percent of gross domestic product for both years.

The balance of payments represents the net amount of foreign currency that enters of leaves the economy during a given period to account for the country’s transactions with the rest of the world. A surplus means the country is making more than it spends, while a deficit represents the opposite.

While the domestic economy remains resilient, the Philippines is not immune to persistent global risks such as weak world trade, investment uncertainty, and geopolitical shocks, the central bank explained.

Highlights from the BSP’s balance of payments projections:

• Merchandise exports to post modest growth of 1–2 percent, recovering from consecutive declines in 2023 and 2024.
• Semiconductor exports remain flat due to global inventory correction.
• Services exports to expand at 8 percent annually, but BPO growth will slow amid US reshoring and local talent shortages.
• Tourism receipts to return to prepandemic trend, led by arrivals from Korea and Japan.
• OFW remittances to grow below long-term average due to workforce localization in host countries like Saudi Arabia and Qatar.
• Foreign direct investments projected to remain steady at $9 billion annually, buoyed by macroeconomic reforms and the country’s exit from the FATF grey list.
• Gross international reserves seen declining slightly to $105 billion in both 2025 and 2026.

The projected widening of the current account deficit—estimated at $19.8 billion in 2025 and $21.2 billion in 2026—is largely attributed to a higher trade-in-goods deficit and slower growth in services exports.

BPO, trade challenges weigh on services outlook

While services exports are expected to maintain growth, the BSP noted that the US policy of reshoring jobs could affect the expansion of the BPO sector. In addition, the country’s shortage of skilled workers in generative AI and data analytics may hinder the industry’s move up the value chain.

Remittance growth, another key external buffer, is forecast to moderate due to workforce nationalization trends in the Middle East. However, the BSP said US immigration policy changes are unlikely to have a material effect, as most US-based Filipino workers are permanent residents.

Cautious optimism on capital flows

On the financial account side, BSP expects sustained capital inflows, particularly in foreign direct and portfolio investments. The ongoing reform agenda—including improved tax incentives and capital market efficiency—remains a bright spot. However, the central bank flagged potential volatility from any pause in US monetary easing, which could dampen capital flows into emerging markets.

The BSP concluded by reiterating the high level of uncertainty surrounding the global outlook, and said it will continue to monitor developments to safeguard its price and financial stability mandates.

— Edited by Daxim L. Lucas