The Philippine balance of payments (BOP) swung to a deep deficit last year as surge in residents’ investments in foreign debt and cooling appetite for local assets outweighed gains from the narrowing trade gap and record remittances.

Based on the Bangko Sentral ng Pilipinas’ (BSP) report released last Friday, the full-year BOP deficit reached $5.66 billion, a sharp reversal from the $609-million surplus recorded a year earlier.

The country’s overall BOP position last year was equivalent to 1.2 percent of the local economy’s output, as measured by gross domestic product (GDP).

According to the BSP, the full-year BOP performance was primarily driven by “softer financial account inflows amid tighter global financial conditions.”

Net inflows in the financial account declined from $19.06 billion in 2024 to $10.89 billion in 2025.

This drop was largely due to residents significantly increasing their investments in foreign-issued debt papers — which jumped $4.62 billion in 2025 from from $430 million a year earlier.

Net foreign direct investment (FDI) inflows likewise eased by 17.1 percent to $7.79 billion from $9.4 billion recorded in 2024. This slumped to their lowest level in a decade—excluding the pandemic slump—as investors stepped on the brakes on injecting funds into the country

Meanwhile, the 2025 deficit was partially tempered by a narrowing of the current account deficit, which dropped from $18.57 billion (four percent of GDP) in 2024 to $16.29 billion (3.3 percent of GDP) in 2025.

This improvement was supported by robust goods export growth of 15.2 percent, reaching $63.41 billion, led by higher shipments of electronic products and gold.

Additionally, the external sector was bolstered by record-high cash remittances, which grew 3.3 percent to $30.82 billion.

The business process outsourcing (BPO) sector also remained a reliable source of earnings, with estimated export revenues reaching $33.5 billion, a 4.8 percent increase from the previous year.

By the end of December 2025, the country’s gross international reserves (GIR) climbed to $110.8 billion, up from $106.3 billion at the end of 2024.

This reserve level remains an adequate external liquidity buffer, equal to 7.3 months of imports and payments for services and primary income. It also provides coverage of about 4.1 times the country’s short-term external debt based on residual maturity.

Financial conditions across the globe tightened due to shifting investor sentiment, geopolitical tensions, and macroeconomic shifts.

Among the major factors that have contributed to the wider deficit were the United States (US) dollar appreciation, and heightened geopolitical and trade policy uncertainties—a climate less attractive for global investors.