The country’s wider current account deficit is raising concerns that the Philippine peso could be vulnerable if global investors turn cautious and foreign capital inflows dry up, according to London-based think tank Capital Economics.

“Of more concern are the Philippines, Colombia, Chile, Brazil, and Poland, where deficits are larger and widening more rapidly,” said Capital Economics chief emerging markets (EMs) economist William Jackson in a Nov. 17 report.

Capital Economics said that while “current account dynamics aren’t a sign that currency collapses are on the cards,” it cautioned that economies with yawning deficits “would be exposed in the event of a deterioration in risk appetite that slows capital inflows.”

“That could cause currencies to sell off, as happened recently in the Philippines amid the corruption scandal, and force policy tightening to reduce imports in order to narrow the external deficit,” the think tank added.

Capital Economics warned that a widening current account deficit reflects unbalanced growth, with domestic demand outperforming external demand.

“In some cases, this has been exacerbated by falls in commodity prices, which have weighed on exports [in] Colombia and Brazil or declines in remittances [in] the Philippines,” it noted.

According to the latest data from the Bangko Sentral ng Pilipinas (BSP), the country’s current account deficit widened to $9.18 billion in the first half of 2025, a 13.6-percent increase from $8.08 billion in the same period a year earlier.

The current account, which measures the country’s net dollar earnings from trade in goods and services and income from overseas Filipino workers (OFWs), posted a bigger gap due to a widening trade-in-goods deficit.

In particular, the larger first-half deficit was driven by imports outpacing exports to meet strong domestic demand. The Philippines is a net importer of the goods it consumes.

The end-June trade deficit, indicating that the Philippines imported more goods than it exported, widened by 2.8 percent to $32.54 billion from $31.65 billion last year. This shortfall was compounded by a double-digit decline in services earnings, which fell from $6.31 billion to $5.49 billion.

The current account deficit, however, narrowed in the second quarter alone, falling 15.3 percent to $5 billion from $5.9 billion in the same period last year—a trend the BSP attributed to “increased trade in goods.”

The wider deficit, combined with lower net financial account inflows, contributed to the country’s overall balance of payments (BOP) reversing to a $5.6-billion deficit in the first half of the year, from a $1.4-billion surplus a year ago.

(Ricardo M. Austria)