The Philippines’ balance of payments (BOP) swung back to a deficit in July, pushing the seven-month BOP position to a negative $5.8 billion from the year-earlier surplus of $1.5 billion, the latest data from the Bangko Sentral ng Pilipinas (BSP) showed.
In July alone, the BOP registered a shortfall of $167 million, against a surplus of $226 million in June. The reversal was traced primarily to the national government’s withdrawal from its foreign currency deposits to service external debt.
The reversal of the BOP position to a deficit in July, as well as in the seven months to July 2025, from surpluses in the comparative periods, has raised concern among analysts over the country’s external position and the stability of the peso.
Combined with the country’s persistent trade deficit, this has created a challenging environment, they said. While the central bank had projected a $6 billion deficit by year-end, which some analysts believe has already been priced into the market, others see the shortfall as a red flag.
FX market volatility
Michael Ricafort, chief economist at RCBC, said the deficit is partly a result of global market volatility, triggered by factors such as the “Trump risk” factor.
He pointed to the country’s increased volatility in the foreign exchange market, with the peso touching a year-to-date low of P58.32 against the US dollar on July 31.
Ricafort noted that geopolitical risk from the Middle East and a strong US dollar could lead to a higher import bill and a wider trade deficit, further weighing on the BOP.
The country’s gross international reserves (GIR), which stood at $105.4 billion at the end of July, remain a key buffer that could be used for market intervention, if necessary.
The BSP recently confirmed it is moving toward a strategy of more forceful intervention during periods of extended peso weakness, gradually moving away from day-to-day intervention.
A red flag
Jonathan Ravelas, senior adviser at Reyes Tacandong & Co, described the July deficit as a “red flag.”
While he attributes it more to government debt payments than weak fundamentals, he believes it puts significant pressure on the peso, creating a pressing need for smarter debt timing, stronger exports and increased foreign investment.
Ravelas also advised the private sector to hedge against currency risks and diversify its markets to navigate the current climate.
More tempered view
Cristina Ulang, head of research at First Metro Investments Corp. (FMIC), offered a more tempered view.
She said the magnitude of the deficit is not likely to have a significant impact in terms of the peso’s volatility, given that the central bank’s earlier forecast had already “telegraphed” the outcome.
She said she believes the foreign exchange market, which is more attuned to US economic indicators and their impact on the dollar, has already priced in the expected deficit.
The BSP assumes an end-2025 BOP deficit of $6.3 billion, reversing the $600 million surplus at the end of 2024.
For 2026, the BOP is expected to remain in a shortfall of $2.8 billion, reflecting a continued current account deficit and a decline in financial flows amid global trade uncertainty.
