BSP sees smaller current account gap despite global headwinds
By Derco Rosal
At A Glance
- Despite expecting the country's current account deficit to widen from the 2025 level, the Bangko Sentral ng Pilipinas (BSP) has improved its outlook, forecasting a narrower deficit for 2026 and 2027 than in its first-quarter projections.
Despite expecting the country’s current account deficit to widen from the 2025 level, the Bangko Sentral ng Pilipinas (BSP) has improved its outlook, forecasting a narrower deficit for 2026 and 2027 than in its first-quarter projections.
Based on the updated June 2026 forecast released on Friday night, June 26, the current account deficit is now seen reaching 3.6 percent of gross domestic product (GDP) in 2026 and 3.7 percent in 2027. These are better than the March projections, which had seen the deficit widening to four percent of GDP in both years.
According to the BSP, the current account deficit is expected “to widen relative to 2025, though less than earlier expected, as weaker domestic demand tempers import growth while export performance remains constrained.”
The current account deficit reflects the gap in the country’s net dollar earnings from trade in goods and services, as well as income from overseas Filipino workers (OFWs).
“Elevated global energy prices continue to exert adverse terms-of-trade pressures, sustaining the trade deficit despite softer demand,” the BSP said.
On the import front, growth for 2026 is now expected to be more moderate than previously feared. Goods imports are seen expanding by four percent in 2026, a downward revision from the six-percent growth forecast in the previous quarter.
“Structural import requirements—particularly for energy and investment-related goods—limit the pace of adjustment,” the BSP said.
Meanwhile, growth in goods exports is projected to stand at three percent for 2026, a significant slowdown from the 15.2-percent expansion recorded in 2025, but unchanged from the previous quarter’s assumption. “Gains in electronics are partly offset by climate-related risks to agriculture exports, easing commodity price support, and slower global trade,” the report read.
For 2027, goods exports are expected to expand by four percent, unchanged from the previous quarter’s projection.
Despite the improved current account outlook, the overall balance of payments (BOP) deficit is now projected to widen more significantly than earlier estimated. The BOP deficit is seen hitting 2.1 percent of GDP ($10.7 billion) in 2026 and remaining at 2.1 percent of GDP ($11 billion) in 2027.
This marks a notable deterioration from the March forecasts of 1.5 percent and 1.6 percent of GDP, respectively.
Additionally, the services sector is expected to post slower growth. Services exports are expected to grow by three percent in 2026, down from the earlier forecast of four percent. This mirrors the 2027 outlook revision to three percent from four percent.
Growth in information technology and business process management (IT-BPM) revenues was also revised downward to 2.5 percent for 2026 from the previous four-percent projection. “IT-BPM earnings are likely to be tempered by artificial intelligence (AI)-related restructuring and weaker investment,” the BSP explained.
Attracting foreign capital is one of the challenges the country faces, the BSP said, noting that “foreign direct investment (FDI) is likely to remain constrained by cautious global investment behavior and domestic structural challenges, while portfolio flows are expected to remain volatile and sensitive to global risk sentiment and financial conditions.”
Net FDI for 2026 is now projected at $7 billion, down from the previously forecast $7.5 billion.
Cash remittances from overseas Filipinos (OFs), which have been a growth engine, are now projected to grow by a slower 2.7 percent in 2026 before returning to three percent in 2027. This marks a deceleration from the 3.3-percent growth recorded in 2025.
“Remittance growth is seen to slow due to reduced deployment, particularly to the Middle East,” the BSP noted in its latest report.
Moreover, the financial account is now projected to post net inflows of $9.8 billion in 2026 and $10.6 billion in 2027, lower than the previous forecasts of $12.9 billion and $13.8 billion, respectively.
Portfolio flows, or so-called “hot money,” are also expected to remain volatile due to changing global risk sentiment and financial conditions, the BSP said, adding that it now expects net foreign portfolio investment (FPI) to ease to $1.8 billion in 2026, down from the previously projected $3.7 billion, before rising to $3.3 billion in 2027.