The Philippines’ balance of payments (BoP) — a comprehensive record of the country’s financial transactions with the rest of the world — registered an $827-million deficit in December 2025, officially bringing the full-year balance to a $5.7-billion deficit, according to the Bangko Sentral ng Pilipinas (BSP).

The BoP tracks the flow of money, goods, services, and financial assets, including international trade and foreign direct investments (FDIs).

A deficit indicates that more funds are leaving the economy than entering it, typically due to weaker exports, softer capital inflows, or lower remittances.

Deficit after consecutive surpluses

In a statement dated 26 December 2025, the BSP had earlier projected a return to a BoP deficit after consecutive surpluses in 2023 and 2024.

“This reversal largely reflects a continued current account shortfall arising from a sustained trade-in-goods gap and weaker services receipts. Foreign direct investments and external loans have also moderated amid lingering global policy uncertainty,” the BSP said.

The deficit reflects cautious foreign investor sentiment, which several economists have linked to uncertainty stemming from the ongoing flood control corruption scandal.

FDIs have declined sharply since the issue surfaced in July, with BSP data showing inflows falling to $642 million in October, down from $1.3 billion in July.

Measures supporting modest FDI gains

The central bank said “cautious market sentiment and heightened global financial volatility” have weighed on investment flows. However, it noted that recent policy measures — including the CREATE MORE Act, the Capital Markets Efficiency Promotion Act (CMEPA), and the Konektadong Pinoy Act — could support modest FDI gains over the medium term. The BSP projects FDIs to reach around $7 billion by the end of 2025.

Despite lingering investor caution, recent developments suggest a possible improvement in sentiment. The landmark free trade agreement with the United Arab Emirates, along with Monday’s discovery of natural gas at the Malampaya East-1 reservoir in Palawan, are seen as positive signals for attracting foreign investment.