The Philippines swung to a balance of payments (BoP) deficit in the second quarter of 2025 as financial account inflows softened, even as external debt rose moderately but remained within sustainable levels.

Data from the Bangko Sentral ng Pilipinas (BSP) showed the country’s BoP posted a US$2.6-billion deficit in April to June, reversing the US$1.2-billion surplus recorded in the same period last year.

For the first half of 2025, the BOP deficit widened to US$5.6 billion, a sharp turnaround from the US$1.4-billion surplus in January to June 2024.

Shift to lower net inflows

The central bank attributed the shift to lower net inflows in the financial account as local banks extended more loans to nonresidents and settled foreign obligations. Portfolio and direct investment inflows also slowed, reflecting investor caution amid global financial uncertainty.

On the current account side, the deficit narrowed in the second quarter due to stronger trade in goods, but widened in the first half overall as imports grew on the back of robust domestic demand and sustained economic growth. Lower net receipts from services further weighed on the account.

Meanwhile, BSP data also showed that the country’s outstanding external debt stood at US$148.87 billion as of end-June, up 1.5 percent from the previous quarter.

Weaker U.S. dollar

The increase was mainly driven by valuation effects from the weaker US dollar, which raised the dollar value of obligations denominated in other currencies, as well as higher net acquisition of Philippine debt securities.

Despite the increase, the debt-to-GDP ratio improved slightly to 31.2 percent from 31.5 percent in the previous quarter, with the BSP noting that the external debt stock “remains sustainable.”

Short-term external debt based on remaining maturity reached US$28.63 billion, which is well-covered by the country’s gross international reserves (GIR) of US$106 billion, equivalent to 3.7 times short-term obligations.

Debt service ratio

The debt service ratio, which compares loan payments with export earnings and other inflows, also improved to 8.7 percent from 9.8 percent a year ago due to lower interest and principal payments.

On a year-on-year basis, external debt rose 14.4 percent, reflecting the national government’s US$5.83-billion bond issuances and external financing by local banks amounting to US$3.44 billion.

While the rising BoP deficit highlights external sector pressures, the BSP underscored that the Philippines’ external debt metrics remain broadly in line with emerging-market peers, supported by ample reserves and improving debt service indicators.