Asia's Three Troubled Balance of Payments

India, Indonesia, and the Philippines are facing deteriorating balance of payments positions due to weak capital inflows and widening current account deficits. Central banks have aggressively intervened in FX markets, but diminishing reserves will likely lead to greater exchange rate flexibility.

Key Takeaways

• 1.Balance of Payments (BoP) positions in India, Indonesia, and the Philippines have weakened due to either large current account deficits or an absence of financial flows.
• 2.Financial flows are constrained by idiosyncratic factors: fiscal concerns in Indonesia, and lack of growth themes/investment repatriation in India.
• 3.Rising oil prices are expected to further widen current account deficits in 2026, creating an emerging funding challenge.

Table of Contents

• A recap of 2025
• What's behind weak financial flows?
• Shifting drivers of FDI
• Weakness in portfolio flows
• The emerging challenge for 2026
• The management of BoP deficits

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