THE PHILIPPINES is likely to post a wide current account deficit this year as elevated oil prices amid the Middle East war inflate the country’s import bill, although a weaker peso could provide some relief, analysts said.
Miguel Chanco, chief Emerging Asia economist at United Kingdom-based think tank Pantheon Macroeconomics, said the country’s current account deficit may reach around -4% of gross domestic product (GDP) this year.
“I think there will almost certainly be a widening of the current account deficit this year versus last, and we’re looking at something close to -4.0% of GDP,” Mr. Chanco told BusinessWorld in an e-mail.
“The biggest factors to blame are the jump in oil prices since the Iran war started, which has exerted a lot of upward pressure on the import bill, while remittances growth continues to slow quite materially,” he added.
If Pantheon Macroeconomics’ forecast is realized, the current account as a share of GDP will widen from last year’s -3.3%, when the deficit stood at $16.3 billion.
In the second quarter, the Philippines’ current account gap ballooned to $8.968 billion or -7.3% of GDP, based on the latest data from the Bangko Sentral ng Pilipinas (BSP).
This was 60.69% wider than the $5.581-billion deficit (-4.5% of GDP) seen a year ago.
The second-quarter figure brought the country’s first-half current account gap to $15.436 billion or -6.4% of GDP, 51.66% larger than the $10.178 billion in the same period last year.
“The current account deficit widened mainly on account of a larger trade-in-goods deficit,” the central bank said in a statement late on Friday.
According to the BSP, the country’s goods exports posted “solid growth” during the period, but imports continued to outpace it.
“Merchandise exports recorded solid growth, largely volume-driven, supported by higher shipments of electronic products, gold, and machinery and transport equipment amid sustained external demand,” the BSP said.
“However, imports continued to grow at a faster pace, primarily reflecting higher import bills, with growth concentrated in telecommunications equipment, electrical machinery, manufacturing inputs, and fuel products that supported domestic investment, production, and energy requirements,” it added.
The central bank noted that the country’s import bill inflated as supply disruptions from the Middle East war pushed up global oil prices.
In June, the country’s trade-in-goods deficit widened by 12.3% to $4.94 billion from $4.4 billion a year earlier, increasing the first-half gap by 25.85% to $30.81 billion.
Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., likewise sees a wider current account gap this year.
“The current account deficit should remain wide in 2026, but its financing remains comfortable,” he said in a Viber message.
The current account measures the country’s trade in goods and services, as well as primary and secondary income.
Primary income refers to flows of labor and financial resources between resident and nonresident institutional units, while secondary income accounts for transfers between the country and abroad, such as remittances from overseas Filipino workers.
WEAK PESO RELIEF
Mr. Chanco noted that the peso’s recent depreciation against the dollar could help the Philippines in narrowing its current account deficit.
“This is ultimately what exchange rates are for; a natural balancing tool for when external deficits (or surpluses) become excessive and unsustainable relative to the size of the economy,” he said.
“Essentially, a weaker peso will make imports more expensive and exports cheaper (from the perspective of overseas buyers), helping to naturally manage the size of the trade deficit,” he added.
Earlier this year, BSP Governor Eli M. Remolona, Jr. said a weaker peso is not inherently disadvantageous for the Philippines as it could also benefit exporters and narrow the country’s current account deficit.
On the other hand, Mr. Ravelas noted that while a weaker peso could provide some relief, the country’s heavy reliance on imports may continue to widen the gap.
“The weaker peso helps at the margins, though the country’s import-intensive growth model will continue to keep the external gap elevated,” he said.
Since the Middle East war erupted in late February, the peso has hit record-low closing levels against the dollar on 24 separate trading days.
On Friday, the local unit plunged to a fresh low of P62.68 versus the greenback after global oil prices blew past $100 per barrel anew, losing 14.5 centavos from its P62.535 close on Thursday.
This broke its previous historic trough of P62.625 seen on Sept. 8, according to Bankers Association of the Philippines data.
Year to date, the peso has slumped by P3.89 or 6.21% from its P58.79 finish on Dec. 29, 2025.
In its latest balance of payments outlook, the BSP said the country’s current account may remain under strain amid its weak export performance and as subdued domestic demand weighs on imports growth.
For 2026, the central bank expects the current account deficit to widen to $18 billion or -3.6% of GDP. — Katherine K. Chan