Global trade storms to widen Philippines’ BoP and current account deficit until 2027

By Katherine K. Chan, A reporter

The Philippines’ balance of payments (BoP) and current account deficits could widen this year until 2027 as weak global trade and geopolitical pressures from the Middle East war weigh on the country’s external situation, the central bank said.

The Bangko Sentral ng Pilipinas (BSP) now sees the country’s BoP position standing at a $7.8 billion deficit at the end of the year or -1.5% of the gross domestic product (GDP).

This is wider than the previous forecast of a gap of 5.9 billion or -1.2% of GDP and the initial deficit of 5.7 billion or -1.2% of GDP posted in 2025.

By 2027, it expects the BoP deficit to widen to $8.5 billion or -1.6% of GDP.

In a statement released late Tuesday, the BSP said the country’s “challenge” and structural issues will keep the Philippines’ BoP under pressure until next year.

“Global growth remains below pre-pandemic trends, and global trade momentum is expected to weaken as tariff-related frontloading eases,” it added. “At the same time, high political tensions, especially in the Middle East, add to the potential risk especially with high energy values ​​and a sense of vulnerability at times.”

According to the BSP, the current account position may worsen to a deficit of 20.3 billion this year or -4% of GDP from its previous forecast of a deficit of 15.3 billion or -3% of GDP.

If it happens, it will be wider than the deficit of $16.3 billion or -3.3% of GDP in 2025.

The central bank also forecasts a wide current account deficit of 21.9 billion dollars by 2027, equivalent to 4% of GDP.

Meanwhile, lower front-loading and higher trade costs are expected to reduce the growth of exports this year to 3% to $65.3 billion and next year to 4% to $67.9 billion.

This is faster than the previous projection of 2% to $61.2 billion, but slower than the 15.2% increase to $63.4 billion recorded in 2025.

“After growing by around 15% in 2025, exports are expected to grow moderately at 3% in 2026 and 4% in 2027, reflecting commodity normalization, weak global trade momentum and higher trade costs,” the BSP said.

However, exports of electronics and agri-food products will boost the sector’s growth, but may be limited by high electricity prices, regulatory conflicts and logistics constraints, it added.

On the other hand, the central bank raised its forecast for the growth of imports to 6% or 137.9 billion dollars from 2% or 130.2 billion dollars among the most expensive oil this year. By 2027, it sees merchandise sales rising 5% to $144.8 billion.

Imports of services are expected to increase by 5% to $40.2 billion in 2026, less than the previous estimate of 6% to $42.3 billion. Imports of services are expected to grow by 6% to $42.6 billion next year.

“(S)ports of services, especially foreign travel, are expected to continue to grow faster than exports of services, adding further pressure to the external balance,” the central bank said.

Regarding exports, the BSP also lowered its growth rate this year to 4% or 53.6 billion dollars from 5% or 54.7 billion dollars previously. It sees a 4% increase to $55.7 billion by 2027.

The central bank also reduced the forecast for the growth of travel receipts to 1% or 8.8 billion dollars from 3% or 9.4 billion dollars in 2026. The central bank sees travel receipts rising 2% to $9 billion next year.

Operating income excluding services is expected to grow 4% this year to $34.8 billion from 5% to $35.2 billion. By 2027, it is expected to increase by 4% to $36.2 billion.

REMITTANCES

Meanwhile, the BSP has kept its growth rate at 3% until next year. Remittances could reach $36.7 billion annually and $37.8 billion by the end of 2027.

“Remittances remain an important source of external stability,” the central bank said. “They are expected to grow by around 3% over the next two years, despite the country’s tense situation, as there are no signs of mass repatriation or restrictions on mass deportations.”

It also sees financial account outflows reach $12.9 billion this year, up from its estimate of $11.7 billion previously. It is expected to rise to $13.8 billion by 2027.

Meanwhile, the BSP maintained its foreign direct investment (FDI) forecast at $7.5 billion in 2026, adding that it sees eight billion in FDI income next year.

With foreign portfolio investments, net inflows could reach $3.7 billion, which is below its previous projection of $5.6 billion. Total revenue is expected to reach $4.1 billion by 2027.

On the other hand, the central bank increased its forecast for the stated funds in 2026 to $111 billion from $110 billion previously. It sees foreign reserves totaling $112 billion by 2027.

“Overall, the outlook points to a systematic but gradual correction, with uncertainty and sentiment pressure spread mainly through price hikes rather than sharp volume cuts,” the BSP said.

“External stability depends on stable financing, strong non-commercial inflows, and adequate foreign exchange reserves. The international monetary base remains sufficient to provide protection against external shocks during the forecast period,” it added.