MANILA, Philippines — The Philippines’ balance of payments (BOP) position is projected to weaken in 2025 and 2026 due to subdued global trade and investor confidence.

Despite this, the domestic economy is expected to maintain expansion, driven by easing inflation and less restrictive monetary policy.

In a report Monday, it said that the overall BOP position is expected to show a deficit in 2025 and 2026, with a wider current account gap resulting from a higher trade-in-goods deficit and lower net receipts in trade-in-services.

The BOP tracks the Philippines’ transactions with other countries over a period. A surplus means more money came in, while a deficit means more money went out.

Slower global economic growth, impacted by U.S. trade policy changes and geopolitical tensions in the Middle East and Eastern Europe, is expected to contribute to the weaker external sector performance. Additionally, the persistent weakness of the Chinese economy and fluctuating commodity prices further dampen global trade prospects.

While global headwinds persist, the domestic economy provides a buffer. Expansion driven by private consumption, investments, and government infrastructure spending will support economic stability.

Merchandise exports are expected to recover modestly after consecutive declines in 2023 and 2024, but semiconductor exports may see flat growth in 2025 due to inventory corrections and evolving global demand.

At the same time, the central bank noted that the services sector, particularly the BPO industry, is projected to expand at a slower pace due to the U.S. job reshoring agenda and domestic shortages of skilled workers in Generative AI (GenAI) and data analytics.

Philippine tourism is expected to continue its recovery, supported by international tourist arrivals, particularly from Korea and Japan, it said.

Overseas Filipino (OF) remittances are forecasted to grow slightly below the long-term trend, as host economies such as Saudi Arabia and Qatar push for workforce localization. However, stricter U.S. immigration policies are expected to have minimal impact on remittances.

The financial account is expected to sustain net inflows from foreign direct and portfolio investments. The country’s exit from the Financial Action Task Force (FATF) Grey List is anticipated to boost investor confidence, though gains may be tempered by U.S. monetary policy shifts limiting capital flows to emerging markets.

The gross international reserves (GIR) level is projected to decline slightly in 2025 and 2026, reflecting reduced foreign exchange inflows from exports and investments, according to the central bank.