BSP sees wider BoP gap until 2027

By Justine Irish D. Tabile, Senior Reporter

THE PHILIPPINES’ balance of payments (BoP) deficit could further widen this year until 2027 as weak global trade and tighter financing conditions weigh on the country’s external position, the central bank said.

Based on its latest forecasts as of June, the Bangko Sentral ng Pilipinas (BSP) now sees the country’s BoP position ending the year at a $10.7-billion deficit or -2.1% of gross domestic product (GDP). This is worse than its earlier forecast of a $7.8-billion gap or -1.5% of GDP.

For 2027, the BSP expects the BoP deficit to further widen to $11 billion or -2.1% of GDP from the earlier projection of $8.5-billion gap or -1.6% of GDP.

“Looking ahead, the Philippines’ external position is expected to remain under pressure in 2026-2027, as cost-driven trade imbalances and tighter financial conditions continue to shape both current account and financing dynamics,” the BSP said in a statement on Friday.

Also, the central bank said it revised its projections for the country’s current account deficit, “as weaker domestic demand tempers import growth while export performance remains constrained.”

It now expects the current account deficit at $18 billion this year or -3.6% of GDP, narrower than its previous projection of a $20.3-billion gap or -4% of GDP. In the first quarter, the current account gap widened to $5.66 billion (-4.8% of GDP) from $4.2 billion (-3.7% of GDP) in the same period a year ago.

If realized, this year’s current account gap would still be wider than the $16.3-billion deficit or -3.3% of GDP in 2025.

For 2027, the central bank forecasts a current account gap of $19.7 billion or equivalent to -3.7% of GDP, narrower than the earlier forecast of a $21.9-billion deficit or -4% of GDP.

“Global growth is projected to remain modest over the next two years, reflecting an expansion that is slower than pre-pandemic norms and constrained by geopolitical shocks,” the BSP said.

“Risks remain tilted to the downside, reflecting the possibility of a prolonged or broader Middle East conflict, deeper geopolitical fragmentation, renewed trade tensions, and weaker-than-expected productivity gains from new technologies,” it added.

The BSP said global trade and capital flows are expected to remain “subdued and volatile.”

TRADE
The central bank said the trade in goods and services deficit may improve in the next two years. It now projects the country’s trade deficit to reach $56.7 billion by end-2026, less than its earlier forecast of $59.2 billion.

For 2027, it now sees the deficit at $61.7 billion, narrowing from the earlier projection of $63.7 billion.

“Elevated global energy prices continue to exert adverse terms-of-trade pressures, sustaining the trade deficit despite softer demand. Structural import requirements — particularly for energy and investment-related goods — limit the pace of adjustment, while gains in electronics are partly offset by climate-related risks to agriculture exports, easing commodity price support, and slower global trade,” the BSP said.

The central bank retained its outlook for goods exports growth this year at 3% and next year at 4%.

On the other hand, it cut its forecast for goods imports growth to 4% from 6% growth. For 2027, it sees goods imports growing at the same pace of its earlier projection of 5%.

The BSP slashed its projections for services exports growth for this year and 2027 to 3% from 4% previously.

It also cut the growth forecast for services imports this year to 4% from 5% previously, and maintained the forecast for 2027 at 6%.

The BSP trimmed its growth estimate for cash remittances at 2.7% to $36.6 billion in 2026 from 3% to $36.7 billion previously. For 2027, it kept its remittance growth projection at 3%.

“Remittance growth is seen to slow due to reduced deployment, particularly to the Middle East,” the central bank said. “IT-BPM (information technology-business process management) earnings are likely to be tempered by AI-related restructuring and weaker investment; and tourism recovery is expected to remain gradual amid high travel costs.”

MUTED INFLOWS
Meanwhile, the central bank expects financial account inflows to hit $9.8 billion this year, lower than its $12.9 billion earlier estimate. For next year, it sees inflows at $10.6 billion, lower than the previous estimate of $13.8 billion.

“On the financing side, inflows are expected to remain positive but moderated, reflecting tighter global liquidity, higher-for-longer interest rates, and increased investor selectivity,” it said.

The BSP slashed its projection for foreign direct investment (FDI) inflows to $7 billion for 2026 from $7.5 billion previously. It retained its $8-billion estimate for FDI inflows next year.

For foreign portfolio investments, net inflows could reach $1.8 billion, lower than its $3.7-billion previous projection. Net inflows are expected to reach $3.3 billion in 2027, lower than $4.1 billion previously.

“FDI is likely to remain constrained by cautious global investment behavior and domestic structural challenges, while portfolio flows are expected to remain volatile and sensitive to global risk sentiment and financial conditions,” the BSP said.

“Although some recovery is anticipated in 2027 — supported by improving global conditions and structural catalysts such as bond index inclusion and sectoral investment pipelines — the rebound in inflows is likely to be gradual and uneven,” it added.

The central bank also cut its 2026 gross international reserves forecast to $104 billion from $111 previously. It sees foreign reserves totaling $105 billion in 2027, down from the previous estimate of $112 billion.