The Philippines' balance of payments (BOP) deficit widened to $5.3 billion in the first quarter of 2026, equivalent to 4.5 percent of GDP, as higher import costs and weaker financial inflows weighed on the country's external position, according to the Bangko Sentral ng Pilipinas (BSP).

The latest deficit was significantly larger than the $3.0-billion shortfall recorded in the same period last year, when the BOP gap stood at 2.6 percent of GDP.

The BOP serves as a comprehensive record of the Philippines' transactions with the rest of the world, including trade, investments, and financial flows. The BSP attributed the wider first-quarter deficit to a combination of higher external debt repayments, softer foreign direct investment (FDI) inflows, and a larger current account deficit driven by rising import costs.

Financial account net inflows declined sharply as banks repaid foreign loans and nonresidents withdrew deposits from local banks. While direct investments remained positive, inflows moderated amid cautious investor sentiment.

The country's current account deficit widened to $5.7 billion from $4.2 billion a year earlier as the trade-in-goods deficit expanded to $17.1 billion from $16.4 billion. Imports grew 8.7 percent to $48.3 billion, outpacing the 5.9-percent increase in exports to $42.6 billion.

Despite the wider trade gap, exports benefited from sustained global demand for electronics, while the services sector continued to provide support through tourism, manufacturing services, and business process outsourcing revenues. Overseas Filipino remittances also remained resilient, with personal remittances rising 2.8 percent to $9.66 billion during the quarter.

Net FDI inflows reached $2.1 billion, slightly below the $2.2 billion recorded a year earlier, while portfolio investment outflows eased as residents reduced investments in foreign debt securities.

However, foreign investors continued to trim their holdings of Philippine debt instruments.

The weaker external position also contributed to a decline in the country's gross international reserves, which fell to $106.6 billion at end-March 2026 from $110.8 billion a year earlier. Meanwhile, the peso averaged P58.95 per US dollar during the quarter, weaker than the P58.69 average recorded in the fourth quarter of 2025.

The BSP said the services sector and remittance inflows continued to cushion external pressures, providing a stable source of foreign exchange despite the widening current account and BOP deficits.