The Bangko Sentral ng Pilipinas expects the country’s external sector to remain under pressure through 2026 and 2027, but says the adjustment should stay orderly and gradual despite rising global risks.
In its latest outlook, the BSP said the Philippine balance of payments will continue to face strain from a difficult global environment and long-standing domestic constraints. Global growth remains below pre-pandemic levels, while world trade is seen losing momentum as tariff-driven front-loading fades.
At the same time, geopolitical tensions, particularly in the Middle East, continue to pose downside risks through higher energy prices and periodic bouts of risk aversion. These conditions are expected to affect the country’s external position mainly by raising costs and weakening sentiment, rather than triggering a sharp drop in trade volumes.
After posting roughly 15 percent growth in 2025, goods exports are expected to expand at a more measured pace of 3 percent in 2026 and 4 percent in 2027. The BSP said the slower growth reflects inventory normalization, softer global trade activity, and higher trade costs.
Still, some sectors are expected to provide support. Electronics exports are likely to benefit from continued demand for AI-related peripherals, electric vehicle components, and data center equipment, while agri-food shipments may gain from sustained global demand for coconut products. Even so, high power costs, regulatory frictions, and logistics bottlenecks are still seen limiting the country’s ability to scale up supply.
On the import side, the central bank expects higher prices to be the main driver of growth, with goods imports projected to rise by 5 percent to 6 percent. Much of that increase will likely come from significantly higher oil prices. Capital goods imports are also expected to remain supported by private sector investment, although softer government infrastructure spending may temper the pace of growth.
At the same time, services imports, particularly outbound travel spending, are expected to continue outpacing services exports, adding further pressure on the external accounts.
The BSP said non-trade inflows should continue to provide some cushion, although challenges are beginning to emerge. Revenues from the information technology and business process management sector are projected to grow by around 4 percent in 2026 and 2027, but expansion may be constrained by skills shortages and the uneven transition toward greater AI exposure.
While some firms are already benefiting from productivity gains from AI adoption, others are still dealing with adjustment costs that could weigh on near-term growth.
Travel receipts are also expected to post moderate gains, though higher airfares, safety concerns, and stronger regional competition could limit the pace of recovery. Meanwhile, cash remittances are expected to remain a key source of external stability, with growth projected at about 3 percent over the next two years.
The BSP noted that despite geopolitical tensions, there are still no signs of mass repatriation or broad deployment bans that could threaten remittance flows.
Taken together, these trends are expected to widen the country’s external imbalance. The BSP projects the current account deficit to settle at around 4 percent of gross domestic product in 2026 and 2027, while the balance of payments is seen remaining in deficit at about 1.5 percent to 1.6 percent of GDP.
Financing inflows are expected to help ease part of the pressure, though not enough to fully offset the widening current account gap. Net foreign direct investment is projected at $7.5 billion to $8 billion, providing a stable source of funding. Portfolio flows may also benefit from easier financial conditions, but these are expected to remain vulnerable to shifts in global market sentiment.
Despite the challenges, the BSP maintained that the country’s external adjustment should remain manageable. It said the outlook points to a gradual and orderly rebalancing, with external uncertainty likely to be transmitted more through higher prices than through a severe contraction in trade activity.
The central bank added that external sustainability will depend on steady financing inflows, resilient earnings from non-trade sources, and sufficient foreign exchange reserves.
The BSP also underscored that these projections are based on a rapidly evolving external environment, particularly developments tied to the conflict in the Middle East, and said the forecasts will continue to be reassessed as new information becomes available.