Wider external gap adds pressure to peso

A wider external imbalance threatens to add further depreciation pressure on the already record-weak Philippine peso, as escalating geopolitical tensions —particularly the United States (US)-backed Israel-Iran conflict—are expected to drive up import costs and weigh on export growth, widening the country’s current account deficit.

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Based on the Bangko Sentral ng Pilipinas’ (BSP) updated 2026-2027 balance of payments (BOP) forecasts released on Tuesday night, March 31, the current account deficit is projected to widen to four percent of gross domestic product (GDP) in 2026 and likely remain at that level in the following year.

This marks a notable deterioration from the previous forecast of three percent and from the actual 3.3 percent in 2025. The current account deficit refers to the gap in the country’s net dollar earnings from trade in goods and services and income from overseas Filipino workers (OFWs).

A wider current account deficit puts depreciation pressure on currencies like the Philippine peso because it reflects a greater demand for foreign exchange (forex) to pay for imports than the supply generated by exports and remittances. The peso has fallen to record lows in recent days amid rising oil prices and supply risks stemming from the ongoing Middle East conflict.