The Bangko Sentral ng Pilipinas (BSP) sees the country’s current account deficit as a share of economic output narrowing in 2025 and further easing in 2026, even as next year’s shortfall is slightly wider than earlier expectations, reflecting a persistent trade-in-goods gap and weaker services earnings.

Based on updated 2025-2026 balance of payments (BOP) forecasts released by the BSP on Friday, Dec. 26, the current account deficit this year is now seen to ease to 3.2 percent of gross domestic product (GDP), marginally narrower than the central bank’s 3.3-percent forecast in the third quarter.

For 2026, the current account deficit—the gap in the country’s net dollar earnings from trade in goods and services and income from overseas Filipino workers (OFWs)—is seen further narrowing to three percent of GDP, although wider than the earlier forecast of 2.9 percent.

As of end-September 2025, the current account deficit stood at 3.6 percent of GDP, narrower than the full-year shortfall equivalent to four percent of domestic output in 2024.

This projected development is expected to translate into the overall BOP, whose deficit is also forecast to ease by year-end and next year to 1.3 percent and 1.2 percent of GDP, respectively, from end-September’s 1.5 percent. These two years’ BOP deficits, however, would reverse last year’s surplus equivalent to 0.1 percent of GDP.

The BSP attributed these estimated deficits to the sustained trade-in-goods gap and lower earnings in services. Growth in inflows from services exports for 2025 was adjusted downward to one percent from two percent earlier, while the forecast for 2026 was retained at five percent.

In particular, travel receipts are now expected to shrink by 2.5 percent this year, a smaller decline than the actual 4.8-percent drop as of end-September. The BSP’s latest outlook for tourism revenues is less optimistic than earlier expectations of one-percent growth for 2025, following actual expansion of 2.2 percent last year. For next year, tourism earnings are still projected to grow by three percent.

Meanwhile, business process outsourcing (BPO) revenue growth remains pegged at five percent this year and next year, although slightly slower than the 5.2-percent expansion as of end-September 2025 and the full-year 2024 industry growth of 7.7 percent.

“Services export growth is projected to moderate due to higher costs relative to competitors in both the BPO (in terms of rental fees, utilities, and wages) and tourism (meals and accommodation) sectors,” the BSP said.

Also, “goods trade is expected to remain soft, shaped by weaker global demand, easing commodity prices, and slower domestic growth momentum,” the BSP said.

Frontloading of outbound shipments in the first half of the year, prior to the imposition of United States (US) tariffs, provided a fleeting boost to merchandise exports. Even so, the BSP said “structural constraints—including logistical bottlenecks, skills mismatches, and high input costs—also continue to weigh on export competitiveness.”

Goods exports are expected to expand by nine percent this year, rising from just one percent in the earlier forecast. They are seen inching up to two percent next year from one percent earlier.

As of the fourth quarter of 2025, goods imports are seen expanding by three percent for the entire year from one percent, while they are projected to grow by two percent in 2026 from one percent.

Despite the massive slowdown as of end-September, services imports are expected to steady at six percent in both this year and the next—unchanged from previous forecasts.

Remittances from overseas Filipinos (OFs) are also projected to remain resilient through 2026 at three-percent annual growth, unchanged from the previous quarter’s forecasts. The BSP said this will be driven by “strong global labor demand and the sustained use of formal transfer channels,” adding that upcoming US taxes on remittances are seen as posing a “minimal impact.”

The financial account—which covers net foreign direct investments (FDI), net foreign portfolio investments (FPI) or so-called “hot money,” and liabilities—is projected to post a slightly narrower deficit of $13.2 billion this year and ease further to $11.7 billion in 2026 from $20.2 billion last year.

“FDIs are expected to ease from 2024, reflecting cautious market sentiment and heightened global financial volatility,” the BSP said.

Gross international reserves (GIR), or the country’s US dollar stock, are seen rising to $109 billion by year-end and $110 billion by end-2026 from $106.3 billion at end-2024, reversing previous forecasts of lower GIR levels for this and next year. GIR stood at $109.1 billion at end-September.