Philippines’ BoP faces risks on several fronts

Expectations of weaker international trade and global economy pushed the Bangko Sentral ng Pilipinas (BSP) to forecast a balance of payments (BoP) deficit this year.

A USD 4.0 billion shortfall for 2025 would be the first BOP deficit since 2022, according to BSP data. That’s a turnaround from a USD 2.1 billion surplus projected in January, with the estimated BoP shortfall driven by an expected wider current account deficit.

A deficit in the payments position – which gives a broad view of the transactions between the Philippines and the rest of the world – could have implications in the local currency.

Here we take a closer look at why the BSP pivoted its view and what it means for the peso.

Tariff cycle

Countries around the world are on the lookout for US President Donald Trump’s announcements about US tariff policies that send ripples across economies and financial markets.

As negotiations between the US and Canada, Mexico, and some European markets bogged down, countries targeted with higher tariffs hit back. This cycle of retaliation will stoke inflation expectations as import costs rise.

For the Philippine economy, global uncertainty and trade wars are now the largest threat.

Bleak outlook

Recently, the Organization for Economic Co-operation and Development (OECD) lowered their growth projection for the global economy, citing uncertainty and trade tensions.

Meanwhile, the International Monetary Fund (IMF) projects steady economic growth, while the World Bank projects a slight pickup  this year compared to last year. However, the IMF and the World Bank’s forecasts remain slower than the global economic growth in the pre-pandemic period.

Trade deficit

The less upbeat global economic outlook raises concerns on trade and the global supply chain. While the US has yet to impose blanket tariffs that will directly affect the Philippines, the dampened outlook suggests weaker demand for Philippine products.

This points to a wider trade deficit, as Philippine exports will be eclipsed by more expensive imports as the tariff war stokes costs.

Locals first

The BSP also noted efforts by Saudi Arabia and Qatar to employ more locals as a risk to 565,000 Filipino workers there, who account for 9% of total remittances.

Any impact is expected to be minimal and temporary. Saudi Arabia’s move targets a few specific industries and may not impact the major occupation groups for Filipinos. Still, it could become a greater risk to employment if other Middle Eastern nations follow suit. Should this happen, Filipinos are expected find jobs elsewhere, as what happened during the pandemic.

Geopolitical tensions in the Middle East and Eastern Europe and weaker demand for exports to China may pose greater risks to the BoP position.

Peso impact

A BoP shortfall due to wider current account deficit may add pressure on the peso spot market.

While the dollar index’s normalization from this year’s peak in January supports the peso, weak goods and services exports will slightly offset episodes of anticipated strength of the local currency.

We expect the USD/PHP level to stay elevated with potential swings, notably in the third quarter of the year when the import season boosts the demand for the dollar.

(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses.)

MARIA KAILA BALITE is a Research Officer of the Research and Market Strategy Department, Institutional Investors Coverage Division, Financial Markets Sector, at Metrobank. She holds a Master’s degree in Applied Economics and also majored in Financial Economics for her Bachelor’s degree, both from De La Salle University Manila. Outside of work, her interests include thriller movies, K-dramas, and dogs.



MARIAN MONETTE FLORENDO is a Research Officer of the Research and Market Strategy Department, Institutional Investors Coverage Division, Financial Markets Sector, at Metrobank. Her academic background is in Mathematics and Economics. She loves solving puzzles and watching mystery movies.

YOSHITAKA HIRAKAWA is a Research Officer of the Research and Market Strategy Department, Institutional Investors Coverage Division, Financial Markets Sector, at Metrobank. He holds a Bachelor’s in Management Engineering from Ateneo de Manila University. With a background in data-driven decision making and quantitative methods, he aims to provide meaningful insights. Hungry for adventure, he constantly seeks new sights, sounds and experiences, from cliff jumping to trying new cuisines.