Philippines balance of payments posts first monthly deficit in three months

MANILA, 21 AUGUST 2026 —

MANILA — The Philippines’ balance of payments (BoP) swung to a $1.47 billion deficit in July, the first monthly shortfall in three months, the Bangko Sentral ng Pilipinas (BSP) reported on Wednesday.

The reversal from June’s $3.403 billion surplus marked a sharp turnaround, with the gap widening from a $167 million deficit a year earlier.

The BoP, which tracks the country’s economic transactions with the rest of the world, reflects a deficit when outflows exceed inflows. The July shortfall was attributed to a persistent trade gap, portfolio investment outflows, and external debt payments, following June’s inflows from foreign borrowing.

“The overall balance of payments, which captures the transactions of the country with the rest of the world, recorded a $1.5 billion deficit in July,” the BSP said in a statement. The central bank noted that the deficit was driven by the country’s trade imbalance and financial outflows, including debt servicing and import demand.

Trade Deficit Widens, Remittances Provide Partial Offset Year-to-date, the Philippines’ BoP deficit narrowed slightly to $5.347 billion from $5.756 billion in the same period last year. The central bank attributed this to continued trade-in-goods deficits and net outflows from foreign portfolio investments, which were partly offset by steady inflows from overseas Filipino remittances, government foreign borrowings, trade in services, and foreign direct investments.

As of end-June, the country’s trade-in-goods deficit ballooned to $30.81 billion from $24.48 billion a year ago, reflecting rising import costs and weaker export performance. UnionBank Chief Economist Ruben Carlo O. Asuncion said the narrower year-to-date BoP deficit suggests the Philippines’ external position remains manageable despite global headwinds.

“Moving forward, developments in global financial markets, trade flows, remittances, tourism receipts, and foreign investments will be key determinants of the BoP outlook,” Asuncion said in a Viber message.

Senior adviser Jonathan L. Ravelas of Reyes Tacandong & Co. pointed to higher foreign exchange outflows, including debt payments and import demand, as the primary driver of the month-on-month reversal. He cautioned, however, that monthly BoP figures can be volatile due to the timing of large transactions.

“The year-on-year deterioration looks significant, but monthly BoP figures are often influenced by the timing of large transactions and should not be viewed in isolation,” Ravelas said.

Foreign Reserves Hit 18-Month Low as Peso Weakens

The BSP’s gross international reserves (GIR) fell to $103.317 billion in July, down nearly 2% from $105.418 billion a year earlier and marking the lowest level in 18 months. Month-on-month, reserves declined by 1.36% from $104.745 billion, largely due to the central bank’s foreign exchange interventions amid a weaker peso.

As of end-July, the Philippine peso stood at P61.432 per US dollar, about 7.2% weaker than P57.306 a year ago. The BSP attributed the reserve drawdown to net foreign exchange operations, including the National Government’s withdrawals from its foreign currency accounts to service external debt.

Despite the decline, the BSP’s gold holdings rose to a two-month high of $17.49 billion, up 26.89% from $13.783 billion a year earlier, driven by higher gold prices. The central bank’s reserve position in the IMF dipped slightly to $725.2 million, while its special drawing rights (SDRs) increased by 1.22% to $3.937 billion.

Composition of Reserves Reflects Market Volatility The BSP’s foreign currency and deposits plunged by about 75% to $1.879 billion from $7.516 billion a year ago, reflecting reduced liquidity in foreign assets. Meanwhile, other reserve assets nearly doubled to $12.129 billion, driven by overnight investments and accrued interest receivables.

The central bank’s holdings of liquid securities fell by 7.95% to $67.157 billion, while its gold reserves and SDRs provided partial support. At end-July, the GIR level was sufficient to cover 6.7 months of imports and payments, more than double the three-month standard, and about 3.7 times the country’s short-term external debt based on residual maturity.

The BSP projects its foreign reserves to shrink further to $104 billion this year from $110.8 billion in 2025, citing continued trade imbalances and tighter financial conditions. The central bank has warned that these factors will likely strain the country’s external position until next year.

Regional Implications and Policy Considerations Analysts say the Philippines’ BoP dynamics could have spillover effects on regional trade and financial markets, particularly for countries with similar export-driven economies. The widening trade deficit underscores the challenge of balancing import needs with export competitiveness, especially as global demand softens.

Ravelas emphasized the need for the Philippines to maintain a healthy balance between foreign exchange earnings and import requirements to mitigate external risks. “The Philippines continues to benefit from strong structural dollar inflows, but maintaining stability amid global economic and geopolitical uncertainties will be,” he said.

The BSP’s projections suggest policymakers may need to consider measures to bolster reserves, such as attracting more foreign investments or encouraging export growth. With global financial conditions remaining tight, the central bank’s ability to stabilize the BoP will be closely watched by investors and analysts alike.

As the Philippines navigates these challenges, the trajectory of its BoP and foreign reserves will remain a key indicator of its economic resilience in an increasingly uncertain global environment.

Related: Bangko Sentral