Philippines' predicted reduction in current account deficit for the years 2025 and 2026, as stated by the central bank.
In Manila, the Bangko Sentral ng Pilipinas (BSP), the Philippines' central bank, has adjusted its forecast for the country's current account deficit, predicting a narrower gap for 2025 and 2026. The deficit is expected to reach 3.3% of GDP this year, and 2.5% next year — a significant decrease from the earlier estimation of 3.9% for both years [1][3][4].
The Narrowing Gap Explained
Q1 2025's Current Account Deficit
Initially, the Philippines faced a hefty current account deficit of USD 4.25 billion in the first quarter of 2025 — nearly double the deficit reported in the same quarter of the previous year. This notable increase was largely due to decreased transport service receipts and rising outbound travel spending, despite robust export growth and overseas Filipino remittances [2]. However, the BSP's revised projections suggest that the deficit will shrink in subsequent periods.
Balance of Payments Adjustments
Despite the broader early-year current account deficit, the overall balance of payments (BOP) remains fortified due to surpluses in the financial and capital accounts. For instance, the financial account posted a surplus of USD 6.65 billion in Q1 2025, helping to stabilize the BOP [2].
Global and Domestic Economic Conditions
The BSP's revised forecast acknowledges ongoing global economic uncertainties and risks, including those related to trade flows and capital movements. The reduced deficit projections reflect anticipation of improved trade balances and more secure capital inflows in the future [3][4].
Trade and Export Dynamics
Although the country continues to experience a sustained trade in goods deficit, strong export performance and overseas Filipino remittances help mitigate the impact on the current account. The narrowing deficit forecast likely stems from assumptions of sustained export growth and foreign exchange inflows from remittances, even as the nation navigates challenging global conditions [2][5].
A Summary of the Revised Forecasts
| Year | Previous Current Account Deficit Forecast (% of GDP) | Revised Forecast (% of GDP) || --------- |-------------------------------------|----------------------------|| 2025 | 3.9% | 3.3% || 2026 | 3.9% | 2.5% |
The revisions, driven by updated data and optimistic assumptions, indicate a more resilient domestic economy amid uncertain global conditions [1][2][3][4][5].
[1] https://www.bsp.gov.ph/statistics/index.php?id=215[2] https://www.bsp.gov.ph/pressreleases/index.php?id=12764[3] https://www.bsp.gov.ph/researchdepartment/sections/sectoraldevelopmentsandmodels/index.php[4] https://www.bsp.gov.ph/researchdepartment/sections/macroeconomicandfinancialanalysis/index.php[5] https://data.worldbank.org/indicator/BX.TRF.PWKR.CD.WD?locations=PH
- The BSP's revised forecast for the Philippines' current account deficit suggests that the finance industry, through the surplus in the financial account, will play a significant role in enhancing the overall balance of payments and countering the initial hefty deficit in Q1 2025.
- In the coming years, robust export growth and overseas Filipino remittances in the business sector are anticipated to continue boosting the economy and helping to narrow the current account deficit, in line with the revised projections by the BSP.
