The Philippine balance of payments improved in the first half of 2026 even as the country’s trade and current-account deficits became larger.
The overall balance-of-payments deficit narrowed by 30.6% to $3.88 billion from $5.59 billion a year earlier, according to the Bangko Sentral ng Pilipinas’ latest detailed external accounts. The 2026 figures are preliminary, while the comparable 2025 figures have been revised.
The improvement, however, did not come from a narrower trade imbalance. Instead, stronger financial inflows helped offset part of a much larger current-account deficit, while changes in unclassified balance-of-payments items also affected the overall result.
The current-account deficit became wider
The Philippines recorded a $15.44-billion current-account deficit during the first six months of 2026, 51.7% wider than the $10.18-billion shortfall recorded during the same period last year.
The deficit was equivalent to 6.4% of gross domestic product, compared with 4.3% in the first half of 2025. The current account captures transactions including goods, services and income flows between the Philippines and the rest of the world.
Goods remained the biggest source of pressure. The merchandise trade deficit widened 15.5% to $37.70 billion as imports continued to exceed exports by a wide margin.
Goods exports rose 9.2% to $34.73 billion, but imports increased faster at 12.4% to $72.44 billion. This means the narrower overall balance-of-payments deficit should not be interpreted as an improvement in the country’s goods trade position.
Services and remittances continued to provide a cushion
Other parts of the external accounts continued to bring money into the country.
The Philippines posted a $5.22-billion services surplus during the first half, up 1.6% from $5.14 billion a year earlier. Services exports reached $25.32 billion against $20.10 billion in imports.
Secondary income also remained strongly positive at $15.69 billion. This category includes transfers such as remittances received from overseas.
Personal remittances increased 2.4% to $19.12 billion during the six-month period, while cash remittances coursed through the banking system likewise rose 2.4% to $17.15 billion. These inflows helped cushion the impact of the large merchandise trade deficit, although they were not enough to prevent the current account from deteriorating.
Stronger financial inflows helped offset the wider gap
One major offset came from the financial account.
The financial account recorded $12.28 billion in net inflows during the first half, up from $8.83 billion a year earlier. Under the BSP’s balance-of-payments presentation, a negative financial-account balance indicates net financial inflows.
Much of the increase came from “other investment,” which registered $9.32 billion in net inflows compared with $4.80 billion a year earlier.
The category covers cross-border financial transactions that are not classified as direct or portfolio investment, including loans, currency and deposits, trade credit and other accounts.
The balance-of-payments accounts also contained $756 million in negative net unclassified items, substantially smaller than the $4.29 billion recorded in the first half of 2025.
The BSP describes these items as an offsetting account used when recorded balance-of-payments receipts or payments do not fully reconcile with the overall position. This means the narrowing of the overall deficit cannot be attributed to stronger financial inflows alone.
FDI was only one part of the financial account
Direct investment remained a source of net inflows, but it was not the main reason financial inflows became stronger.
The broader balance-of-payments direct-investment account recorded $3.67 billion in net inflows, slightly below $3.77 billion in the first half of 2025.
Separately, the BSP’s closely watched measure of foreign direct investment into the Philipines showed net inflows falling 17.8% to $3.38 billion from $4.12 billion a year earlier.
Portfolio investment also weakened. It shifted from about $337 million in net inflows in the first half of 2025 to roughly $615 million in net outflows this year.
The numbers underline why FDI, portfolio flows and the balance of payments should not be treated as interchangeable indicators. They measure different types of transactions within the country’s broader economic relationship with the rest of the world.
The first-half deficit hides a sharp June turnaround
The $3.88-billion first-half deficit also reflects a significant improvement during June.
The country had accumulated a $7.28-billion deficit through May before posting a $3.40-billion monthly surplus in June, reducing the six-month shortfall to $3.88 billion.
That improvement did not continue into the following month. The Philippines posted a $1.47-billion BoP deficit in July, bringing the cumulative January-to-July deficit to $5.35 billion.
The first-half breakdown therefore shows that a smaller overall deficit did not necessarily mean every part of the country’s external position improved. The trade and current-account gaps widened, while stronger financial inflows helped absorb part of the deterioration elsewhere in the balance of payments.
