The country's financial transactions with the rest of the world registered a deficit in March this year due to the national government meeting its obligations for overseas debts and the central bank's activities in the foreign exchange market.

The Bangko Sentral ng Pilipinas (BSP) reported on Monday, April 21, that the Philippines posted a $2 billion balance of payments (BOP) deficit in March, a reversal of the $1.2 billion surplus recorded in the same month last year.

“The BOP deficit reflected the national government’s (NG) drawdowns on its foreign currency deposits with the BSP to meet its external debt obligations, as well as the BSP’s net foreign exchange operations,” the central bank said.

The March shift resulted in a cumulative BOP deficit of $3 billion for the first three months of the year.

According to the BSP, the end-March deficit was primarily attributed to a widening trade deficit. However, the negative impact was partly offset by consistent inflows from remittances sent by overseas Filipino workers, foreign direct investments, and the national government's foreign borrowings.

Michael L. Ricafort, Rizal Commercial Banking Corp. chief economist, said the turnaround was largely attributed to the proceeds from the national government's $3.29 billion global bond issuance in January 2025.

Ricafort also said that the latest BOP figure reflects the ongoing challenges posed by the country's persistent trade deficit, wherein import values exceed export earnings. 

He added that the deficit was also influenced by the outflow of foreign currency for debt servicing and other international obligations. 

Furthermore, Ricafort noted that the monthly decrease in foreign investments was partly triggered by higher import tariffs imposed by the United States under President Trump on goods from China, Mexico, and Canada during March, as well as the anticipation of reciprocal tariffs scheduled for April 2, 2025, which heightened volatility in global markets.

As a result of the BOP deficit, the country's gross international reserves (GIR) decreased to $106.7 billion by the end of March 2025, a slight decrease from the $107.4 billion recorded at the end of February 2025.

Despite the decline, the BSP noted that the current GIR level remains substantial, providing an adequate buffer equivalent to 7.4 months' worth of imports and services payments.

The central bank further noted that this level also covers approximately 3.6 times the country's short-term external debt based on residual maturity.

As per the BSP’s latest forecast as of the first quarter of 2025, the country’s BOP position 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.

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.