IMF sees PHL current account deficit narrowing

THE International Monetary Fund (IMF) expects the Philippine current account deficit to narrow gradually through 2030, driven by declining commodity prices and increased public and private savings.

In a report following its Article IV Consultation with the Philippines, the IMF maintained its forecast for the current account deficit this year at 3.8% of gross domestic product (GDP), but trimmed its projection for next year to 3.4% from 3.5%.

The IMF’s estimates exceed the Bangko Sentral ng Pilipinas (BSP) projections of 3.3% for 2025 and 2.9% for 2026.

“The current account deficit is expected to decline to 3.8% of GDP in 2025, supported by lower commodity prices,” it said.

The IMF expects the current account deficit to further narrow to 3.1% in 2027, 2.9% in 2028 and 2.7% in 2029 and 2030.

“It is projected to improve modestly over the medium term, driven by higher public and private saving, but higher investment will sustain the current account deficit through the medium term, while reforms to boost FDI (foreign direct investment) will help with its financing,” it added.

At the end of September, the current account deficit narrowed to $12.507 billion from $13.336 billion a year earlier.

This is equivalent to 3.6% of GDP, down from 4% in the same period last year.

The current account measures the trade in goods and services, as well as primary and secondary income. Primary income refers to flows of labor and financial resources between resident and nonresident institutional units, while secondary income accounts for transfers between the country and abroad, such as remittances from overseas Filipino workers.

Despite the projected narrowing of the current account deficit, the IMF noted that the Philippine external position remains weaker than expected.

“The authorities project a slightly faster decline in the current account deficit but broadly agree that the external position is weaker than levels implied by fundamentals and desirable policies,” it said.

The IMF continues to see the Philippines affected by geopolitical tensions and global trade uncertainty. 

In October, the central bank revised its current account projections, anticipating a wider deficit until next year amid a growing trade-in-goods deficit, weaker services receipts and subdued capital inflows due to global trade disruption.

The BSP expects the current account deficit to widen to $16.4 billion or 3.3% of GDP this year, and to $15.5 billion or 2.9% of GDP in 2026. — Katherine K. Chan