QUICK LOOK: PH economy starts 2025 with $4-B outflow as gov’t pays foreign debt

The Philippines recorded a $4.1-billion balance of payments deficit in January 2025, significantly higher than the $740-million deficit in January 2024, according to the Bangko Sentral ng Pilipinas (BSP).

Key points:

• $4.1-billion balance of payments deficit in January 2025 – Up from $740-million deficit in January 2024.
• Driven by forex operations and government debt payments – BSP cites external obligations.
• Gross dollar reserves drop to $103.3 billion – Lower than $106.3 billion at end-2024 but still a strong buffer.
• Dollar reserves cover 7.3 months of imports – Ensuring sufficient external liquidity.
• Dollar reserves remain 3.7 times short-term external debt – Signifying stability despite the decline.

The balance of payments is the periodic tally of the net value of foreign currency that enters or leaves the economy due to the country’s trade, investments, and other transactions with the rest of the world. A surplus means the economy is earning more than it is spending, while a deficit means the opposite.

According to the BSP, the large deficit in January was driven by its net foreign exchange operations and the national government’s foreign currency drawdowns for debt servicing.

As a result, the country’s gross international reserves dropped to $103.3 billion from $106.3 billion at end-2024.

Despite the decline, the reserves remain sufficient, covering 7.3 months of imports and servicing 3.7 times the country’s short-term external debt.