The Philippines’ balance of payments (BOP) position is expected to face significant pressure for the rest of this year as escalating global trade disputes and geopolitical conflicts are set to hamper foreign exchange flows into the country.
This assessment comes from Diwa Guinigundo, former Bangko Sentral ng Pilipinas (BSP) deputy governor and country analyst for GlobalSource Partners (Philippines).
Guinigundo anticipates a softening of Philippine exports, primarily due to higher US tariffs. Concurrently, remittances from Overseas Filipino Workers (OFWs) — a critical source of the nation’s foreign exchange — are projected to dwindle amid ongoing hostilities in the Middle East.
“It’s quite difficult to see more positives for the BOP over the horizon,” Guinigundo told this writer, specifically citing concerns about “uncertainty in the Middle East, especially now that Turkey [has] declared war on Israel,” challenging OFW remittances.
Global growth seen at 2.8%
The International Monetary Fund (IMF) projects global economic growth at 2.8 percent for 2025 and 3 percent for 2026, figures notably lower than the historical average of 3.7 percent.
This deceleration in global growth implies “lower demand for OFWs, business process outsourcing, as well as other goods and services — all figuring in the BOP computation,” Guinigundo explained.
The BOP, a comprehensive summary of a country‘s economic transactions with the rest of the world, categorizes these as current, financial, and capital accounts.
Remittances fall under the current account, while Foreign Direct Investments (FDI) and foreign portfolio investments (hot money) are grouped within capital accounts.
Slower growth in remittances is also expected to impact private consumption, although a “manageable inflation environment may be a good incentive to personal consumption,” Guinigundo said.
The BSP projects a more moderate 2.8 percent growth for cash remittances this year, down from 3 percent in 2024, translating to an estimated $35.5 billion for 2025 and $36.5 billion for 2026. Cash remittances totaled $34.49 billion in 2024.
Widening PH deficit
The BSP recently reported a six-month BOP shortfall of $5.588 billion through June, a significant reversal from the $1.441 billion surplus recorded in the same period last year.
While June saw a reversal to a $226 million surplus — the first monthly surplus this year — driven by government foreign currency deposits and investment income, the overall first-half deficit remains pronounced.
The primary driver of the January-to-June deficit, the BSP said, is the Philippines’ persistent trade in goods deficit. As of end-May this year, the trade deficit stood at $19.7 billion, marginally down from $20.7 billion in end-May 2024, based on Philippine Statistics Authority data.
Guinigundo highlighted the fact that the impending 20 percent tariffs on Philippine exports by the Trump administration, effective Aug. 1, 2025, are already impacting the country’s shipment to the US.
“Exports are definitely a challenge because of the higher reciprocal tariff in the US,” he said.
Even if other countries face lower or comparable tariffs, the additional duty will raise the price of Philippine goods, potentially “dampening domestic demand in the US for exports.”
The Mid-East factor
The higher tariffs and Middle East conflicts are also expected to exacerbate the current account deficit and reduce both investment and financial flows.
“This is why we are quite pessimistic about the prospects of both FDI and FPI (foreign portfolio investments),” Guinigundo added.
He expressed concern that the Philippines might be “quite late in attracting multinational firms relocating from high tariff countries like China,” which could have otherwise translated into higher foreign investment and future foreign exchange revenues.
Despite these external headwinds, the former BSP official observed a robust trend in domestic investment, seemingly undeterred by “political noises, trade tension and overall policy uncertainty.”
He also emphasized the importance of optimizing government spending, urging for every peso of budgetary allocation to be utilized effectively and avoiding unnecessary expenditures.
For 2025, the BSP forecasts the country’s BOP deficit at $6.3 billion, before sinking to a projected $2.8 billion for 2026.
This follows a modest surplus of $609 million in 2024, which was smaller than initially expected due to a higher trade deficit and increased foreign currency borrowing.
