BOP deficit widens to $5.9B in August

The Philippines’ balance of payments (BOP) deficit widened by roughly 9.3 percent to $5.9 billion in the first eight months of 2026, as the country continued to run a trade deficit and recorded net outflows from foreign portfolio investments.

Data from the Bangko Sentral ng Pilipinas (BSP) showed the January-to-August deficit was larger than the $5.4 billion shortfall recorded in the same period last year. The country posted a $596 million BOP deficit in August alone.

RCBC Chief Economist Michael Ricafort said the August deficit was “the narrowest in two months or since June 2026,” but marked a reversal from the $359 million surplus recorded in the same month a year earlier.

“[T]his could reflect the continued trade deficit/net imports amid relatively higher global crude oil prices that increased the country's import bill, [as well as] volatility in the global financial markets that led to some foreign portfolio investment outflows after the 60-day interim US-Iran deal lapsed on 17 August 2026, as a new US-Iran peace deal/talks remained elusive,” he said.

The BOP measures the Philippines’ transactions with the rest of the world. The year-to-date deficit was partly offset by continued inflows from overseas Filipino remittances, foreign borrowings by the national government, trade in services and foreign direct investments.

Ricafort noted that the $5.9 billion deficit may reflect an increased trade deficit due to persistent oil price pressures and a weakening currency raised by the broad effects of the Middle East conflict.

Meanwhile, the country’s gross international reserves (GIR) increased to a five-month high of $104.8 billion at the end of August from $103.3 billion a month earlier.

The $1.5 billion increase was mainly driven by higher valuations of the BSP’s gold holdings following the rise in international gold prices, as well as higher net income from the central bank’s investments abroad as global bond yields increased.

The latest reserve level was equivalent to 6.6 months’ worth of imports of goods and payments of services and primary income. It also represented about 3.3 times the country’s short-term external debt based on residual maturity.

BSP data showed that the reserve buildup was concentrated in gold and other reserve assets, while foreign currency securities declined to $64.04 billion in August from $67.16 billion in July.

The value of the BSP’s gold holdings rose to $19.11 billion from $17.49 billion during the period, while currency and deposits declined to $1.54 billion from $1.88 billion. Other reserve assets increased to $15.47 billion from $12.13 billion.

The August reserve position, however, remained below the $107.1 billion recorded a year earlier and the record $113.3 billion reached in February 2026.

Despite the wider BOP deficit, the BSP said the end-August reserve level provides the country with sufficient foreign exchange liquidity to meet import requirements and external debt obligations and serve as a buffer against external shocks.