Mideast war pushes PH dollar deficit to over one-year high
More foreign currency left the Philippines than entered in March, pushing the balance of payments (BOP) gap to its widest in more than a year as the Middle East crisis drove a surge in energy prices, forcing oil-importing countries to spend more dollars on fuel and prompting investors to pull back from emerging markets.
The Philippines’ BOP—an accounting of the country’s transactions with the rest of the world—posted a $2.6-billion deficit in March, the largest since the $4-billion shortfall in January 2025, data from the Bangko Sentral ng Pilipinas (BSP) showed.
For the first quarter, the deficit reached $5.3 billion, nearly 79-percent wider than a year earlier. It already accounted for almost 68 percent of the BSP’s year-end estimate of a $7.8-billion BOP deficit.
Forex reserves
Consequently, the country’s gross international reserves—foreign assets that serve as a buffer against external shocks—slipped to $106.6 billion in March. The stockpile still covered about seven months of imports and was roughly 3.9 times the country’s short-term external debt based on residual maturity, well above global adequacy metrics.
“The wider balance of payments deficit in March reflects elevated import demand—particularly for energy and capital goods—alongside softer export receipts and portfolio outflows amid volatile global financial conditions,” said Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines.
“Higher uncertainty and risk‑off sentiment early in the year continue to weigh on short‑term capital flows,” Asuncion added.
Now in its eighth week, the conflict involving the United States, Israel and Iran has disrupted traffic through the Strait of Hormuz, a narrow passage that carries about one-fifth of the world’s oil supply. The upheaval has helped drive up fuel prices, prompting the Philippines, a net oil importer, to declare a national energy emergency.
The turmoil has also pushed investors toward safer assets, triggering a sell-off in Philippine equities and sending the peso to record lows past 60 to the dollar. The central bank has said the balance of payments is likely to remain under pressure until next year, projecting the deficit to widen further to $8.5 billion, or 1.6 percent of gross domestic product, in 2027.
“The Philippines’ external position remains manageable, supported by steady remittances, resilient foreign investment inflows, and ample foreign exchange reserves,” Asuncion said. “We expect the BOP position to stabilize gradually as global conditions normalize and export momentum improves later in the year.”
