Philippines balance of payments deficit widens as reserves fall below $100 billion

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Philippines balance payments deficit

Highlights

Philippines posted a $3.144 billion balance of payments deficit in September, up sharply from $596 million in August and reversing a $82 million surplus a year earlier.
Gross international reserves fell below $100 billion to $99.494 billion at end-September, the lowest in three years, amid peso depreciation and reserve drawdowns for debt service.
Bangko Sentral ng Pilipinas now forecasts a $9.2 billion balance of payments deficit in 2025 and projects dollar reserves at $104 billion for 2026, down from $110.8 billion last year.

September external gap deepens amid trade and debt pressures

As reported by BusinessWorld Online, Bangko Sentral ng Pilipinas data showed the Philippines posted a $3.144 billion balance of payments deficit in September, far wider than the $596 million gap in August and reversing the $82 million surplus recorded a year earlier.

The September result marks the third straight month of deficit and the biggest monthly shortfall since January 2025, when the gap reached $4.078 billion. Economists said the deterioration likely reflects a wider trade deficit, higher import and debt-service payments, and softer capital flows as global uncertainty persists.

For the first nine months, the country's balance of payments deficit widened to $9.087 billion from $5.315 billion a year earlier. In a statement, the BSP said the year-to-date position reflects the continued trade in goods deficit and net outflows from foreign portfolio investments, partly offset by sustained inflows from overseas Filipino remittances, foreign borrowings by the National Government, trade in services, and foreign direct investments.

Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said the latest reading raises the risk that the full-year outcome could exceed official projections, even as structural foreign exchange inflows from remittances, business process outsourcing revenues, and tourism continue to support the external position.

Reserve buffer remains adequate despite peso weakness

Revised BSP data also showed gross international reserves stood at $99.494 billion at end-September, down from $104.846 billion a month earlier and $109.06 billion a year earlier. The stock of reserves falls below $100 billion for the first time in three years, with the central bank attributing the decline to net foreign exchange operations after the peso weakened, valuation losses on gold and foreign currency assets, and lower foreign currency deposits from the National Government as it paid external debt.

The peso breached the P62-per-dollar level in September and averaged P62.6125 during the month. By end-September, it had weakened by P3.85, or 6.15%, from its Dec. 29, 2025 finish of P58.79.

Despite the decline, the BSP said the reserve level remains sufficient to cover 6.2 months of imports of goods and payments of services and primary income, well above the three-month benchmark, and equivalent to about 3.1 times the country's short-term external debt based on residual maturity. The central bank now projects a $9.2 billion balance of payments deficit for this year, narrower than its earlier $10.7 billion estimate, and sees dollar reserves at $104 billion in 2026, down from $110.8 billion last year.

Our earlier article on planned Philippine sovereign bond reforms explained how a new pricing convention for peso government bonds and expected inclusion in J.P. Morgan’s Government Bond Index-Emerging Markets could broaden the investor base and improve liquidity. It also noted that any market benefits are not automatic and will still hinge on global rates, exchange-rate expectations, and fiscal credibility, while deeper structural reforms are needed for capital-market modernization to translate into stronger investment and productivity gains.

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