More money is expected to flow out of the Philippines over 2025 and 2026, as the country is projected to import more than it exports and the services sector is seen to underperform, according to the Bangko Sentral ng Pilipinas (BSP).

“The Philippine balance of payments (BOP) position is projected to be weaker in 2025 to 2026 due to slower global trade and subdued investor confidence linked to increased uncertainty in global trade policy and geopolitical developments,” the BSP said in a March 24 statement.

As per the BSP’s latest forecast as of the first quarter of 2025, the country’s BOP position—measured by the sum of the country’s current, capital, and financial accounts—would post a $4-billion deficit this year, equivalent to 0.8 percent of gross domestic product (GDP).

In the fourth quarter of 2024, the BSP forecasted a $2.1-billion BOP surplus for 2025.

This deficit would be driven by a wider current account shortfall due to higher trade deficits and weaker revenues from services.

As countries grapple with the United States’ (US) trade policy shifts and reactions from their trading partners, the global economy is seen to expand at a slower pace through next year.

Weaker global growth will be largely influenced by the “ongoing weakness in the Chinese economy, prolonged geopolitical tensions in conflict zones of the Middle East and Eastern Europe, and commodity price volatility.”

Last year, the country’s BOP surplus dropped to $609 million, sharply lower than the $3.7 billion recorded in 2023, as a wider current account deficit weighed on the country’s external position. This BOP decline marks a nearly 84-percent, or $3.1-billion, decrease year-on-year.

The country’s current account deficit, which further expanded to $17.5 billion last year, is projected to continue widening to $19.8 billion this year. This figure is equivalent to 3.9 percent of GDP.

Exports slowdown

Generally, exports are seen to expand modestly in 2025 and 2026. Merchandise exports are expected to grow modestly after two years of decline, while semiconductor exports will likely remain flat due to inventory corrections and shifting global demand.

Services exports will also suffer a slowdown due to “the adverse impact of the US job reshoring,” coupled with the “domestic challenges in the supply of skilled workers in Generative AI (GenAI) and data analytics.”

“The latter may hamper industry efforts to climb up the value chain and maintain competitiveness,” the BSP warned.

The good news is, the tourism industry is projected to return to pre-pandemic levels, driven by rising arrivals from South Korea and Japan.

Funds sent home by the Filipinos working and living abroad are expected to grow slightly below trend as major host countries such as Saudi Arabia and Qatar push for workforce localization. Stricter US immigration policies, meanwhile, are seen to have minimal impact.

Steady foreign investments

“Meanwhile, the financial account will be buoyed by sustained net inflows from both foreign direct and portfolio investments,” the central bank said.

It argued that strong macroeconomic fundamentals and reforms to improve business conditions and capital markets in the country would be the main support to the country’s stable financial account.

Another factor seen to boost investor confidence is the country’s recent exit from the global money-laundering watchlist.

“Investment gains, however, may be tempered by a pause in US monetary policy easing, which would limit capital flows to emerging market economies, including the Philippines,” the BSP noted.

2026 outlook

For next year, the BSP expects the overall BOP to remain in deficit, as the current account gap is expected to widen further from the 2025 forecast.

The overall BOP shortfall is projected to hit $4.3 billion in 2026, also equivalent to 0.8 percent of GDP.

Meanwhile, steady net inflows from the financial account are expected to support the country’s BOP outlook.

“Nonetheless, significant downside risks persist, including uncertainty from US trade and investment policies, weaker global activity and world trade, as well as ongoing geopolitical and trade tensions,” the BSP noted.

Further, the country’s gross international reserves (GIR), or the US dollar stock, are expected to dip slightly during the period due to lower foreign exchange inflows from exports and investments.