The country is expected to post deficits from global financial transactions this year and the next due to lower incomes from services exports, overseas Filipinos’ remittances and foreign investments.

In its outlook report, the Bangko Sentral ng Pilipinas (BSP) said deficits could hit $4 billion this year and $4.3 billion in 2026 from an initially estimated $2.1-billion surplus as the country pays higher for imports over earnings from exports amid a tightening of finances by foreign investors.

“Global economic growth is expected to remain soft in 2025 and 2026, as economies contend with US trade policy changes and responses from trading partners,” the BSP said.

BPO demand to weaken

The Bank said demand for business process outsourcing (BPO) in the country might weaken as American firms prioritize hiring of fellow citizens under US President Donald Trump’s “America First” policy.

It added that the rapid development of artificial intelligence might limit BPO-linked job opportunities for Filipinos as the technology accomplishes various tasks more efficiently without human intervention.

“The latter may hamper industry efforts to climb up the value chain and maintain competitiveness,” the Central Bank said.

The BSP projects BPO revenues to hit $33.5 billion this year and $35.2 billion in the next, with a steady growth of 5 percent.

IT and Business Process Association of the Philippines president Jack Madrid said the BPO industry last year saw revenues grow seven percent to $38 billion from 2023’s.

US the biggest market

The United States is the biggest market of Philippines-based BPO firms, accounting for 70 percent of total clients.

With a weaker BPO industry, the Central Bank sees lower income from all exports at $111.7 billion compared to payments for goods imports at $128.7 billion this year. For next year, total exports income could grow to $117.8 billion, although still lower than import costs of $136.4 billion.

“Global growth prospects are expected to be further dampened by several factors, including the ongoing weakness of the Chinese economy, prolonged geopolitical tensions in conflict zones in the Middle East and Eastern Europe and commodity price volatility,” said the BSP.

Due to a smaller market for tourism, mostly consisting of South Koreans and Japanese, the BSP forecasts tourism revenues to decline to $10.8 billion this year and to $12 billion in 2026, from an initial estimate of $12.6 billion.

VAT refund for non-resident tourists

However, Philippine Chamber of Commerce and Industry president George Barcelon said tourists should be attracted by the recently enacted Value-added Tax Refund for Non-Resident Tourists. “I think this would be attractive to tourists. But the policy should be limited to purchased goods and not food or service related,” he said.

Overseas Filipino workers’ remittances are also expected to slow down by 2.8 percent to $35.5 billion this year and by three percent to $36.5 billion in 2026.