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The Bangko Sentral ng Pilipinas (BSP) said it has revised downward its 2025 balance of payments (BOP) outlook to a deficit from a surplus on expectations of soft global economic growth due to “uncertainty in trade policy and geopolitical developments.”
The central bank now expects the country to post a $4 billion payments deficit for this year, instead of its previous projection of a $2.1 billion surplus.
For full-year 2024, the country’s BOP stood at a $609 million surplus.
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“The BOP position is projected to be weaker due to slower global trade and subdued investor confidence linked to increased uncertainty in global trade policy and geopolitical developments,” the BSP said in a statement late Monday.
“The outlook, nevertheless, reflects sustained expansion in the domestic economy, supported by easing inflation and less restrictive monetary policy,” the BSP added.
The BOP measures a country’s economic transactions with the rest of the world during a given period.
Global policy uncertainty
The revision from a projected surplus to a significant deficit is “indeed noteworthy,” Jonathan Ravelas, BDO lead strategist, told Malaya Business Insight on Tuesday.
“This change reflects the ongoing challenges arising from the global policy uncertainty, particularly due to Trump’s ‘disTRUMPtion,’” he said.
“The shift to a $4 billion deficit from an earlier projection of a $2.1 billion surplus indicates that the BSP is preparing for a more cautious economic environment,” Ravelas added.
The surplus of $609 million in 2024 shows there were positive factors in the previous year, “but the outlook for this year seems more challenging,” Ravelas said.
Last month, the country’s payments position registered a $3.1 billion surplus, swinging upward from a $4.1 billion deficit in January this year. But the surplus fell short of narrowing the aggregate $992 million deficit for the first two months of the year, and compares with the $936 million deficit in January to February 2024.
Domestic strength
The BSP said global economic growth is expected to remain soft in 2025 and 2026, as economies contend with US trade policy changes and the responses from trading partners.
Geopolitics, unstable trading prices and China’s weak economy are additional factors contributing to global uncertainty, it said.
“Global growth prospects are expected to be further dampened by several factors, including the ongoing weakness in the Chinese economy, prolonged geopolitical tensions in the conflict zones of the Middle East and Eastern Europe, and commodity price volatility,” the BSP said.
However, growth prospects on the domestic front can “provide a cushion against global headwinds.”
“Domestic expansion driven by private consumption, investments, including government infrastructure spending, as well as continued progress on legislative reforms to improve the business environment should encourage foreign investments and positively impact the external sector outlook in the near to medium term,” the central bank said.
In adjusting its payments outlook, the BSP took into consideration a wider current account gap as a result of higher merchandise trade deficit and lower net receipts from trade-in-services.
The current account is expected to post a wider deficit of $19.8 billion from an earlier forecast of $12.1 billion.
The current account posted a $17.5 billion deficit at end-2024.
Based on BSP’s calculations, Philippine exports could reach $55.6 billion this year, compared with an earlier forecast of $58.8 billion.
In 2024, Philippine exports reached $55 billion.
Imports are expected to hit $128.7 billion, compared with a previous central bank forecast of $129.9 billion.
Imports reached $123.8 billion last year.
Services exports are expected to post a modest expansion on slower growth in the business process outsourcing.
Services exports could reach $56.1 billion, compared with a previous forecast of $57.4 billion. In 2024, the services sector churned out $52.0 billion.
External challenges
The buildup of external challenges has compelled the BSP to reiterate that its forecasts have its limitations.
It said the way to overcome such limitations is for the central bank to closely monitor emerging developments and risks on the external front and how these may impact the BSP’s fulfillment of its price and financial stability objectives.
Michael Ricafort, RCBC chief economist, said Trump’s higher US import tariffs and other protectionist policies, alongside geopolitical risks, such as renewed tensions in the Middle East and the continued Russia-Ukraine war “could slow down global economic GDP growth, in terms of slower global investments, trade, employment and other business activities.”
“Tighter immigration rules by Trump could also slow down OFW remittances,” Ricafort said.
“As a result of all of these, Philippine exports could slow down amid slower global trade and could widen the country’s trade deficit and, in turn, the current account deficit,” he said.
Foreign direct investment could also lose its pace on Trump’s “America first” policies, while increased volatility in the global financial markets could scare foreign portfolio investments, Ricafort added.
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