The Philippines’ balance of payments (BOP) stood at a deficit of $4.1 billion in January 2025, widening from a $740 million deficit recorded in the same month last year, the Bangko Sentral ng Pilipinas (BSP) said yesterday.
The BOP deficit was the biggest in 11 years, or since January 2014, when the gap was at $4.48 billion.
The central bank, however, is expecting the BOP to return to a surplus of $2.1 billion by yearend.
The January deficit reflected the BSP’s net foreign exchange operations and drawdown by the national government on its foreign currency deposits with the BSP to meet external debt obligations, BSP Governor Eli M. Remolona Jr. said in a statement.
The BOP is a measure of the country’s economic transactions in a given period with the rest of the world.
Remolona said a decrease in gross international reserves (GIR) also had an impact on the payments position. The GIR dropped to $103.3 billion in January 2025 from $106.3 billion at the end of 2024.
Remolona, however, stressed that the latest GIR level represents a more than adequate external liquidity buffer equivalent to 7.3 months’ worth of imports of goods and payments of services.
“Specifically, the latest GIR level ensures availability of foreign exchange to meet the balance of payments financing needs, such as for payment of imports and debt service, in extreme conditions when there are no export earnings or foreign loans,” Remolona said.
Moreover, it is also about 3.7 times the country’s short-term external debt based on residual maturity, he said.
Earlier, the BSP said the latest forecast points to the payments position’s resilience in 2025.
Full-yr surplus
BSP’s projections as of Jan. 3, 2025 showed the BOP reaching a full-year surplus of $2.1 billion, or 0.4 percent of GDP, an improvement from an earlier estimate of a $1.7 billion surplus.
Remolona said this assessment is underpinned by stable yet moderating global and domestic economic growth prospects; a slowing inflation trajectory across jurisdictions; lingering geopolitical and weather shocks; as well as possible shifts in US trade and investment policies under the Trump administration.
Foreign inflows
Michael Ricafort, RCBC chief economist, said BOP and GIR data could increase in the coming months, “largely due to the $3.3 billion additional foreign commercial borrowings made by the national government in the latter part of January 2025.”
“Any improvement in BOP data and GIR data for the coming months could still help provide a greater cushion for the peso exchange rate, especially against any speculative attacks. It will also help strengthen the country’s external position,” Ricafort said.
The “Philippine economy is still expected to have one of the fastest economic growth rates in the region,” Ricafort said.
Ricafort said that reform measures are expected to continue to encourage foreign investment inflows into the country, such as the CREATE MORE, amendments to the Public Service Act, Retail Trade Liberalization Act, amendments to the Foreign Investment Act, and 100 percent foreign ownership on renewable power projects, among others.
Jonathan Ravelas, BDO Unibank’s chief market strategist, is not surprised that the BOP recorded a deficit in January, but he took note of the large amount of the gap.
“It is not uncommon to see deficits at the start of the year due to seasonal factors, such as payment of foreign debts and other obligations, but the magnitude of this deficit is unusually large,” Ravelas said in a Viber message.
“This higher deficit can be concerning as it indicates a substantial outflow of foreign currency, which can put pressure on the country’s foreign exchange reserves and the peso weaken anew.”
Ravelas, however, pointed out the importance of considering the context, such as the national government’s foreign debt payments and foreign exchange operations amid a volatile peso exchange rate.
“In the long term, the impact of such a deficit will depend on how the government manages its foreign obligations and whether it can sustain growth in structural US dollar inflows from remittances, BPO (business process outsourcing) revenues, and other sources,” Ravelas said.
