After swinging to a $3-billion deficit in the first quarter, the Philippines’ balance of payments (BOP) is projected to more than double at $6.3 in the second quarter of the year, marking its widest shortfall in more than four years since the $9.14 billion posted in the last quarter of 2020, the peak of the pandemic. 

According to the Bangko Sentral ng Pilipinas (BSP), this wider deficit is equivalent to 1.3 percent of the country’s gross domestic product (GDP), reversing the $1.20 billion surplus in the same quarter in 2024. It would also be wider than the 0.8-percent deficit in the first quarter. 

“This outlook reflects a continued current account shortfall and moderating financial flows,” the BSP said in a statement released on Monday, June 30. Last quarter, the $3-billion deficit was driven by a wider account deficit, which doubled to $4.2 billion from $2.1 billion in 2024. 

“While the domestic economy benefits from steady growth, low inflation, and ongoing structural reforms, these are offset by global trade uncertainty, heightened geopolitical risks, and weakened investor confidence,” the BSP stressed. 

From a $ 19.8 billion deficit in the previous quarter, which accounted for 3.9 percent of the GDP, the BSP expects this shortfall to narrow in the current quarter to 3.3 percent. This deficit is seen to return to eventually narrow to 2.5 percent in the second quarter next year, despite some fluctuations.  

The three-percent level of deficit reflects “a gap in savings over investment amid global uncertainties.” As such, the BSP said borrowing from foreign lenders is still needed to support the country’s strategy to drive growth with infrastructure and investments. 

“Goods exports continue to face headwinds from global trade uncertainty, lagging competitiveness, and constraints in the semiconductor industry,” the central bank said. 

Meanwhile, the BSP noted that the services trade remains generally “resilient, although downside risks persist. Outsourcing revenues are supported by stable demand for contact center services, yet they confront uncertainties due to US job reshoring initiatives and local talent shortages.” 

Tourism earnings benefit from improved airport facilities and increased lodging options; however, heightened competition from other locations and rising transportation expenses could slow the recovery process.

On the other hand, service imports would drop to $39.6 billion from $42.6 billion in the first quarter, but it is expected to pick up to $47.8 billion in the first quarter of next year and moderate to $42.4 billion by the end of next year’s first half.

Remittance flows from Filipinos working and living abroad are projected to remain steady at the first-quarter level $35.5 billion, which would inch up to $36.5 billion by the end of the next year’s first half. 

According to the BSP, this stability would “continue to provide a buffer against trade deficit, supported by strong labor demand for Filipino workers in key sectors as well as by the aging populations in host countries.” Money transfer costs have been eased since the country’s exit from the global money-laundering watchlist early this year.

“However, the rise of protectionist policies in some host countries presents emerging risks,” the central bank said. The higher tariffs imposed by US President Donald Trump have been affecting the overall stability of global trade.

The financial account deficit would ease to $13 billion from the higher $16.2 billion in the previous quarter. “Foreign investment inflows remain positive but subdued, as policy uncertainty and the global slowdown weigh on investor sentiment.”