BoP position swings to deficit in July

The Philippines’ balance of payments (BoP) position swung to a USD 167-million deficit in July as the government paid off external debt, the central bank said on Tuesday.

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed the BoP position stood at a USD 167-million deficit in July, a reversal from the USD 226-million surplus recorded in June and the USD 62-million surplus in July 2024.

“The BoP deficit reflected National Government’s (NG) drawdowns on its foreign currency deposits with the BSP to service external debt obligations,” the BSP said in a statement.

For the first seven months, the BoP deficit widened to USD 5.756 billion, marking a reversal from the USD 1.504-billion surplus in the January-July period last year.

BoP refers to the country’s economic transactions with other nations. A surplus indicates more funds entered the country, while a deficit shows that the country spent more than it received.

“Preliminary data indicate that the year-to-date BoP deficit was largely due to the continued trade in goods deficit,” the central bank said.

The Philippines’ balance of trade in goods, or the difference between the values of exports and imports, posted a USD 3.95-billion deficit in June, based on data from the Philippine Statistics Authority.

For the first semester, the trade deficit narrowed to USD 23.97 billion from the USD 25.06-billion deficit a year ago.

“This (BoP deficit) was partly offset by the sustained net inflows from personal remittances from overseas Filipinos, foreign borrowings by the NG, and foreign portfolio investments,” the BSP added.

This comes amid prevailing “global trade uncertainty, heightened geopolitical risks, and weakened investor confidence,” the BSP said.

Earlier this year, the central bank revised its BoP forecasts for 2025 to a USD 6.3-billion deficit and for 2026 to a USD 2.8-billion gap.

“The latest BoP deficit (is) partly due to some payment of foreign currency debts and other foreign obligations (as well as the) continued trade deficit and net imports of the country in recent months,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in an e-mail. “Though (this was) offset by some frontloading of Philippine export sales before Trump’s higher tariffs take effect.”

He also noted that the deficit came “amid the continued Trump risk factor or premium that led to some market volatility worldwide in view of the Aug. 7 deadline for the United States’ trade deals and tariffs.”

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said the BoP deficit “reflects the growing pressure from trade imbalances and external payments, particularly rising imports, weaker exports, and possibly some debt-related outflows.”

“It is a reminder that global uncertainties and tariff risks continue to weigh on our external sector,” he said via Viber.

“While the National Government and BSP still have tools to stabilize the BoP such as boosting tourism, remittances, and managing capital flows, the outlook remains cautious. Without stronger exports or a more stable Philippine peso, deficits may persist in the near term,” he added.

The BSP expects the overall BoP position to end at a USD 6.3-billion deficit or -1.3% of gross domestic product this year.

GIR decline

Meanwhile, the country’s gross international reserves (GIR) slipped to USD 105.4 billion as of end-July from USD 106 billion at end-June.

“The level of GIR remains an adequate external liquidity buffer, equivalent to 7.2 months’ worth of imports of goods and payments of services and primary income,” the BSP said. “Moreover, it covers about 3.4 times the country’s short-term external debt based on residual maturity.”

GIR comprises foreign-denominated securities, foreign exchange, and other assets such as gold. It enables a country to finance imports and foreign debts, maintain the stability of its currency, and safeguard itself against global economic disruptions.

The central bank expects GIR to settle at USD 104 billion by end-2025. — Katherine K. Chan