BSP cuts external outlook as war weighs on foreign inflows
The Philippines is likely to face a weaker external position this year than previously anticipated as the conflict in the Middle East weighs on dollar inflows from investments and overseas remittances, according to the Bangko Sentral ng Pilipinas (BSP).
In a statement, the BSP said the country was projected to post a balance of payments (BOP) deficit of $10.7 billion in 2026, equivalent to 2.1 percent of gross domestic product (GDP).
That was wider than the central bank’s previous forecast of a $7.8-billion gap, or 1.5 percent of GDP. It would also mark a bigger shortfall than the $5.7-billion BOP deficit recorded in 2025.
The BOP, which measures the country’s transactions with the rest of the world, falls into deficit when payments abroad exceed foreign currency inflows.
The BSP said the Philippines’ external position would remain under pressure this year and next as elevated energy prices, persistent trade imbalances and tighter global financial conditions weigh on both the current account and capital inflows.
The wider BOP deficit would leave gross international reserves (GIR) at an estimated $104 billion this year, down from the previous projection of $111 billion.
“Elevated global energy prices continue to exert adverse terms-of-trade pressures, sustaining the trade deficit despite softer demand,” the BSP said.
“On the financing side, inflows are expected to remain positive but moderated, reflecting tighter global liquidity, higher-for-longer interest rates, and increased investor selectivity,” it added.
The BSP expects merchandise imports to reach $135.3 billion this year, lower than its previous forecast of $137.9 billion despite higher global oil prices. It said weak domestic demand, as households and businesses grapple with elevated inflation, would temper import growth.
Export receipts, meanwhile, are projected to remain constrained, the BSP said. Merchandise exports are forecast at $65.3 billion, unchanged from the previous estimate.
Travel receipts are still expected to reach $8.8 billion this year despite higher travel costs. But the BSP trimmed its forecast for business process outsourcing revenues to $34.3 billion from $34.8 billion, citing artificial intelligence-related restructuring and weaker investment.
The central bank also slightly lowered its forecast for cash remittances to $36.6 billion from $36.7 billion, reflecting reduced deployment of overseas Filipino workers, particularly to the Middle East.
Net inflows of foreign direct investment are now projected at $7 billion this year, down from the previous estimate of $7.5 billion. Net foreign portfolio investment inflows are likewise expected to reach $1.8 billion, sharply lower than the earlier projection of $3.7 billion.
“FDI is likely to remain constrained by cautious global investment behavior and domestic structural challenges, while portfolio flows are expected to remain volatile and sensitive to global risk sentiment and financial conditions,” the BSP said.
Looking ahead, the central bank said the BOP deficit could further widen to $11 billion in 2027, translating to a GIR of $105 billion.
“Although some recovery is anticipated in 2027—supported by improving global conditions and structural catalysts such as bond index inclusion and sectoral investment pipelines—the rebound in inflows is likely to be gradual and uneven,” the central bank said.
