PH returned to dollar deficit in ’25
The Philippines ended 2025 with a smaller-than-expected dollar deficit, as inflows from key foreign-exchange sources helped cushion persistent outflows from the country’s trade gap.
Data released by the Bangko Sentral ng Pilipinas (BSP) showed that the country’s balance of payments (BOP)—which tracks all foreign exchange inflows and outflows—swung to a deficit of $827 million in December 2025, bringing the full-year shortfall to $5.7 billion.
The result marked a sharp reversal from the $609-million surplus recorded in 2024 and added pressure on the Philippine peso, which was buffeted by bouts of extreme volatility in the final months of the year amid weak investor confidence.
Even so, the outcome was less severe than the central bank’s projection of a $6.2-billion BOP deficit for 2025.
“It reflects a mix of weaker capital inflows, softer foreign direct investment (FDI) and continued net outflows from portfolio investments, alongside a persistently wide trade deficit driven by imports,” said John Paolo Rivera, a senior research fellow at state-run Philippine Institute for Development Studies (PIDS).
The dollar deficit recorded in the final month of 2025, Rivera added, may have been due to “year-end debt servicing, profit repatriation and portfolio rebalancing, which are typical toward the close of the year.”
Overall, the BSP said last year’s BOP gap translated to gross international reserves (GIR) of $110.8 billion, which can help the country finance its imports and foreign debt obligations, stabilize its currency and provide a buffer against external economic shocks.
The buffer funds—made up of foreign-denominated securities, foreign exchange and other assets including gold—could cover 7.4 months’ worth of imports of goods and payments of services and primary income, way above global standards.
The GIR could also cover about 3.9 times the country’s short-term external debt based on residual maturity.
Looking ahead, the BSP is expecting a BOP deficit of $5.9 billion in 2026, equivalent to 1.2 percent of the country’s gross domestic product. That is projected to translate to a GIR of $110 billion.
“The BOP position will hinge on FDI recovery, export performance, remittance growth, and global financial conditions, particularly US interest rates,” PIDS’ Rivera said.
“While near-term pressures from global uncertainty and peso weakness may persist, a pickup in investments and exports could help narrow the deficit this year, with GIR expected to remain broadly stable barring major external shocks,” he added.
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