The Bangko Sentral ng Pilipinas (BSP) is expected to revise its end-2025 balance of payments (BOP) forecast within the next few days to reflect the latest trends in the country’s external accounts.
The BSP’s policy making arm, the Monetary Board, reviews and updates its external position forecasts every quarter. The next round of projections is expected this week.
In its last BOP forecast review in June, the BSP estimated the BOP will end the year at a deficit of $6.3 billion, equivalent to 1.3 percent of gross domestic product (GDP). The forecast was based on the global and local growth scenarios, heightened geopolitical conflict, the trade tensions and lackluster investor confidence.
The June forecast was higher than the March projection of a $4 billion deficit, equivalent to 0.8 percent of GDP.
In both the March and June BOP forecasts, the BSP took into account the country’s widening trade deficit as goods imports continued to outpace exports.
The moderation in exports growth to $16.3 billion in the second quarter was due to uncertainty in global growth, which affected mostly the semiconductor sector, the BSP said.
Imports, meanwhile, continued to increase to $32.3 billion in the second quarter, with stable domestic demand and infrastructure spending.
The BSP noted higher imports in telecommunications equipment and electrical machinery; aircraft, ships and boats; passenger cars; petroleum crude; and metal products.
8-month BOP deficit shrinks to $5.4B
Based on the latest data from the BSP, the BOP deficit narrowed to $5.397 billion in the eight-month period to August from $5.756 billion in January to July.
The eight-month BOP, however, reverses the $1.592 billion surplus posted in the corresponding eight-month period in 2024, based on preliminary data.
For the month of August alone, the BOP improved to a surplus of $359 million, reversing the $167 million deficit in July.
The August surplus was also higher than same month last year of $88 million due to BSP’s earnings from its overseas portfolio funds.
Chief economist Michael Ricafort of Rizal Commercial Banking Corp. said the August BOP surplus largely benefited from the BSP’s income from its investments abroad, cushioning the Philippines’ external debt payments during the period.
Ricafort warned, however, that external risks could still undermine the BOP position because of uncertainty in the global economy.
He said the US government’s “Trump risk premium” remains a persistent threat since the unresolved trade tariffs could spark market volatility anytime.
Explaining the January to August BOP shortfall, the BSP pointed to the trade in goods deficit. As of end-July, the trade deficit stood at $28.5 billion, narrowing from $29.9 billion recorded in the same period last year
Despite the trade gap, the country’s sustained net inflows contributed to the narrowing of the year-to-date BOP deficit, the BSP said. Inflows came from remittances, foreign direct and portfolio investments, trade in services and the government’s foreign borrowings.
Final GIR at $107.1B
With the latest BOP report, the BSP updated the final gross international reserves (GIR) for January to August with an upward revision by $1.19 billion to $107.097 billion, compared with the initial figure of $105.905 billion released earlier.
With the final data, the current GIR was also revised higher by $1.68 billion than the January to July reserves of $105.418 billion.
For this year, the end-August reserves mark the highest since February, when GIR reached $107.395 billion.
The BSP releases the GIR twice a month as preliminary and final data, part of its commitment to the International Monetary Fund (IMF) as a member-creditor country. All IMF members adhere to the special data dissemination standard of reporting resources and financing.
The BSP said the BOP position “mirrored the increase” in the GIR. The BOP is a summary of the economic transactions of a country with the rest of the world for a specific period.
It further noted that the GIR “remains an adequate external liquidity buffer.”
At the current level, it is equivalent to 7.2 months’ worth of imports of goods and payments of services and primary income.
The US dollar reserves are also considered sufficient to cover about 3.7 times of short-term external debt based on residual maturity.
The dollar reserves help a country “finance its imports and foreign debt obligations, stabilize its currency, and provide a buffer against external economic shocks,” the BSP said.
The BSP’s reserve assets, which constitute its GIR, include foreign investments, gold and foreign exchange holdings, reserve position in the International Monetary Fund and special drawing rights.
