The Philippines’ economy continues to navigate a complex global and domestic landscape, with recent data showing stable external debt, a moderate balance of payments deficit, and a calibrated monetary policy easing as the country balances growth and financial stability.
According to the Bureau of the Treasury, the country’s outstanding external debt reached US$149.09 billion at the end of September 2025, [1] marking a marginal 0.1% increase from the previous quarter.
The slight uptick was driven by net acquisitions of Philippine debt securities by non-resident investors totaling US$1.47 billion, partially offset by US$764.56 million in repayments and US$442.50 million in valuation adjustments following the U.S. dollar’s appreciation.
Measured against the country’s gross domestic product (GDP), external debt now stands at 30.9%, slightly lower than the 31.2% recorded in Q2. Analysts point out that the Philippines’ short-term external debt [2] obligations of US$27.16 billion remain well-covered by gross international reserves (GIR) of US$109.06 billion, providing a coverage ratio of 4.01 times — higher than many emerging market peers.
The country’s debt service ratio [3] also improved to 8.5%, from 11.5% a year ago, reflecting lower principal and interest payments by domestic borrowers.
BOP deficit persists amid global financial uncertainty
The balance of payments (BOP), which tracks the country’s international financial transactions, registered a US$5.3-billion deficit (1.5% of GDP) in the first nine months of 2025. The shortfall is attributed to tighter global financial conditions and lingering trade uncertainties, affecting both the current and financial accounts.
The current account tracks trade in goods and services along with income flows, while the financial account captures investments and loans, and the capital account includes grants and one-off transfers. Despite the deficit, analysts say the Philippines’ strong external reserves and manageable debt profile provide a buffer against short-term shocks.
In response to evolving economic conditions, the Bangko Sentral ng Pilipinas (BSP) reduced its Target Reverse Repurchase (RRP) Rate by 25 basis points to 4.50%, with the overnight deposit and lending rates adjusted to 4.00%and 5.00%, respectively. The Monetary Board cited a benign inflation outlook, with forecasts for 2026 and 2027 slightly rising to 3.2% and 3.0%, respectively.
“The outlook for domestic growth has weakened further due to governance concerns and uncertainties in global trade,” the BSP’s monetary policy-making body said in a press release. “However, domestic demand is expected to rebound gradually as monetary policy easing takes effect and public spending improves in both pace and quality.”
Cautious monetary policy supports growth amid uncertainty
The central bank also emphasized that any additional policy easing will likely be limited and guided by incoming data, signaling a cautious approach as the country seeks to balance growth with financial stability.
Economists note that these developments collectively highlight the resilience of the Philippine economy.
The country’s external debt remains manageable, short-term obligations are well-covered, and the measured easing of interest rates provides support to households and businesses while maintaining price stability.
As global and domestic uncertainties persist, policymakers continue to monitor key indicators closely, ensuring that debt sustainability, balance of payments stability, and prudent monetary policy work together to support sustainable economic growth.
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[1] Borrowings owed by residents to non-residents.
[2] STRM debt is composed of loans with original maturities of one (1) year or less plus amortizations on medium- and long-term accounts falling due within the next 12 months.
[3] Debt Service Ratio relates principal and interest payments (or debt service burden) to XGSI (receipts from exports of goods and services and primary income) as a measure of adequacy of the country’s foreign exchange (FX) earnings to meet maturing obligations. It is computed as debt service burden over XGSI, multiplied by 100. A lower ratio is desirable as it means a smaller portion of XGSI is used to repay external debt. This allows more resources to be allocated toward economic growth and improves the country’s FX buffers against external shocks.
