WHILE MOST OF its neighbors in Southeast Asia are enjoying broadly stable current account balances, the Philippines seemed on a lone journey taking an opposite route.
Taking cue from the assessment report made public by the Bank of America (BofA), the country referred to as the Pearl of the Orient is facing a sustained deterioration, despite a healthy remittance position and robust IT-business process management services.
BofA particularly hinted at the state of external balances across the Association of Southeast Asian Nations (ASEAN) focusing on trade and its subsequent impact on growth.
CELLAR DWELLER
“We find that despite the growing headwinds from external trade, current account balances across the region have remained in a manageable state, with only Philippines showing a steady trend of wider deficits, while other economies in the region remain rangebound,” reads part of a news article which first came out in the Philippine Star.
BofA said the Philippines has consistently posted current account deficits over the past years, while Indonesia, Vietnam and Singapore have strengthened their external positions.
“On a long-term basis, current account trends in the region appear to show mild but consistent shifts, with Malaysia and Philippines showing a persistent trend of steady deterioration,” BofA noted.
ACCOUNT DEFICIT
The Philippines’ current account deficit eased to $5 billion (4% of gross domestic product) in the second quarter, down by 15.8 percent from $5.9 billion (5.2% of GDP) last year, as stronger exports helped trim the trade gap.
Indonesia has recorded improvements due to stronger processing of mineral and resource exports, while Vietnam has swung from a persistent deficit to a sizable surplus.
Thailand remains volatile, shifting between deficits and surpluses depending on tourism inflows. Singapore continues to post large and stable surpluses.
TRADE & REMITTANCE
BofA identified weak trade in goods was key in pulling down the Philippine current account. While most of ASEAN saw frontloaded export gains in the first half, the Philippines underperformed, keeping its trade deficit wide.
Manufacturing was underperforming, which resulted in more importations of practically every item needed by the people and the country.
The country’s reliance on remittances and information technology-business process management (IT-BPM) services has partially cushioned the gap, but these inflows are not growing fast enough to close it.
Growth in remittances of the Philippines consistently trailed behind the nominal GDP growth thus their importance to the external account has gradually diminished, the bank said.
FRAGILE POSITION
Tourism receipts, which are helping neighboring Asian countries like Vietnam and Malaysia recover their services surpluses, have also been slower to rebound in the Philippines.
As if the current predicament isn’t enough, the Philippines also topped the World Risk Report 2025 which released rankings of the most dangerous countries to visit.
The yardstick — high exposure to extreme weather effects.
The Philippines is also grappling with fiscal and monetary pressures. BofA highlighted that the fiscal deficit in August ballooned to P84 billion, up by 56 percent year-on-year, bringing the shortfall to P869 billion from January to August, or 25 percent higher than the same period last year.
WEAK CURRENCY
On the monetary front, the peso weakened by nearly 2% in September as the Bangko Sentral ng Pilipinas (BSP) signaled it was nearing the end of its policy easing cycle.
The BSP has already lowered interest rates by 150 basis points since August 2024, bringing the key rate down to five percent.
BofA said it expects the central bank to reiterate that “the terminal rate is within sight” at its Oct. 9 policy meeting. The widening current account gap underscores a structural weakness that could weigh on investor sentiment and external stability.
“Medium-term challenges remain,” BofA cautioned, stressing that the Philippines’ heavy dependence on remittances and IT services, coupled with persistent goods trade deficits, makes it more vulnerable than its ASEAN peers.
NETIZENS’ TAKE
Despite the challenging external picture, BofA said ongoing government support and a focus on improving fiscal spending quality could prevent a sharper slowdown in economic activity.
Interestingly, Filipino social media users don’t seem surprised by BofA’s assessment amid the “widespread corruption from people at the top of government to the lowest levels in the local governments.
“Foreign investors are put off, and the peso weakens further. Thus, the citizens suffer even more,” another one responded.
But Belarmino Viray says “this is mainly due to poor governance as a result of lack of leadership resulting in wanton corruption. Another factor is the lack of patriotism, or maybe a sense of nationhood.”
“During my elementary school years in 1951-57 the lives of our heroes were taught in the class,” he said.