MANILA, Philippines — The Philippines is expected to post balance of payments (BOP) deficits equivalent to about 1 percent of gross domestic product (GDP) in 2025 and 2026, the Bangko Sentral ng Pilipinas (BSP) said, citing persistent current account shortfalls and subdued financial inflows.

In its latest assessment, the BSP said the outlook reflects a mix of steady domestic growth, low inflation, and structural reforms, weighed down by global trade uncertainty, geopolitical tensions, and waning investor confidence.

The country’s current account deficit is projected to remain at around 3 percent of GDP, signaling a continued gap between domestic investment and savings. This highlights the economy’s reliance on external financing to sustain its infrastructure-led growth trajectory.

Exports are expected to stay under pressure amid global trade headwinds, competitiveness challenges, and semiconductor supply constraints. While opportunities exist through trade diversion, issues such as logistical inefficiencies and workforce limitations hinder progress. Meanwhile, stable domestic demand and public infrastructure spending support import growth, although declining global commodity prices—especially oil—may temper overall import value.

The services sector remains a bright spot, buoyed by steady demand for outsourcing services and an improving tourism sector. However, US job reshoring trends, local talent shortages, and rising transport costs pose risks to sustained momentum.

Overseas Filipino remittances continue to help cushion the trade deficit, supported by robust labor demand abroad and an aging global population. The country’s removal from the FATF grey list and improvements in digital payment systems have lowered remittance costs, though emerging protectionist policies in host countries present challenges.

Foreign investments are expected to remain positive but subdued, amid global economic slowdown and policy uncertainties. Nonetheless, reforms such as the CREATE MORE Act and the Capital Markets Efficiency Promotion Act, along with infrastructure push and fiscal incentives, aim to attract long-term capital.

The BSP noted that limited trade and investment flows will constrain the buildup of foreign exchange reserves, although reserves are still projected to remain adequate, offering a buffer against external shocks.

The central bank also cautioned that forecasts remain subject to change due to the volatile global environment, and reiterated its commitment to monitor risks and maintain price and financial stability.