The country posted a $4.1 billion deficit in global financial transactions, or balance of payments, in January, the highest in 11 years, data from the Bangko Sentral ng Pilipinas (BSP) revealed.

The latest deficit increased from the $740 million recorded in the same month last year and from $2.86 billion in 2014. It also rose from the $1.5 billion deficit in December of last year.

"The deficit in January 2025 reflected the BSP's net foreign exchange operations and drawdowns by the national government  on its foreign currency deposits with the BSP to meet its external debt obligations," BSP said.

The Bureau of the Treasury reported that foreign debt by the national government grew by 11.4 percent last year to P5.12 trillion compared to 2023.

The BSP added that the country's lower gross international reserves (GIR), at $103.3 billion as of end-January 2025 from $106.3 billion as of end-2024, further widened the deficit in its global financial transactions.

GIR consists of foreign investments, gold, foreign exchange, reserve positions, and special drawing rights in the International Monetary Fund.

However, the BSP said the latest GIR level remains more than adequate to cover 7.3 months' worth of imports of goods and payments for services and primary income. That is twice as long as the global standard of three to four months.

"While it is not uncommon to see deficits at the start of the year due to seasonal factors such as payment of foreign debts and other obligations, the magnitude of this deficit is unusually large," Jonathan Ravelas, financial market strategist and senior adviser at Reyes Tacandong & Co., told DAILY TRIBUNE.

He said the higher deficit last month could be "concerning" if the government fails to minimize foreign debt amid volatile foreign exchange movements.

"It indicates a substantial outflow of foreign currency, which can put pressure on the country's foreign exchange reserves and weaken the peso anew," Ravelas said.

Rizal Commercial Banking Corporation chief economist Michael Ricafort said protectionist economic policies by U.S. President Donald Trump threaten to weaken the peso against the U.S. dollar.

The local currency hovered over P58 per dollar this week, down from P59/dollar recorded last month and in November and December of last year, data from the Bankers Association of the Philippines show.

Ricafort said investors have been seeking U.S. dollars from elevated bond rates as a hedge against economic uncertainties under the Trump administration, which could lead to a stronger U.S. dollar.

The economist cautioned that the persisting Russia-Ukraine war and "tighter U.S. sanctions on Russia's oil exports" could raise global oil prices.

"In the long term, the impact of such a deficit will depend on how the government manages its foreign obligations and whether it can sustain growth in structural US dollar inflows from remittances, business process outsourcing revenues, and other sources," Ravelas said.

Ricafort added the country's GIR worth over $100 billion should help it attract affordable interest rates from foreign lenders.

"That is positive for sustaining the country’s favorable credit ratings of one to three notches above investment grade as consistently seen despite the pandemic or over the past five years," he said.

Moving forward, Ricafort said the deficit in the Philippines' global financial transactions could contract as the national government receives funds from new foreign borrowings.

In the latter part of January, the Department of Finance announced the government raised $3.29 billion from U.S. and Euro bond offerings.