Sharply widened CAD in 2Q. The current account deficit (CAD) widened to USD3bn in 2Q25 (-0.8% of GDP) from a revised USD0.23bn (-0.07%) in 1Q (Mansek: USD2.9bn; Consensus: USD2.8bn) (Exhibit 1). The goods trade surplus narrowed to USD10.6bn from USD13bn in 1Q, reflecting higher goods imports, led by capital goods (see GDP Review: GDP Growth Climbed Above 5% in 2Q).
Stable services deficit. The services deficit was broadly stable at USD5.5bn in 2Q, unchanged from 1Q. The transport deficit declined to USD2.2bn from USD2.4bn, reflecting higher foreign tourist arrivals of 3.9mn vs 3.2mn in 1Q, with outbound travelers broadly stable. However, the travel services surplus fell sharply to USD0.1bn from USD1.1bn, providing some offset due to higher service payments during the Hajj season.
Primary income deficit widened. The primary income deficit widened to USD9.8bn in 2Q from USD9.3bn in 1Q during the dividend payment season. Dividend repatriation from both foreign portfolio investment and FDI increased sharply. Meanwhile, the secondary income surplus rose slightly to USD1.7bn from USD1.6bn, supported by stronger remittance inflows. Assuming stable primary income deficit from 1Q, the CAD widened by less sharply to USD2.5bn or 0.7% of GDP in 2Q.
Foreign outflows intensified. The financial account recorded a USD5.2bn deficit, deeper than the USD0.4bn deficit in 1Q, driven by portfolio investment outflows (Exhibit 2). Portfolio investment saw a USD8.1bn outflow, reversing USD1bn inflows in 1Q, led by SRBI and the equity market. Meanwhile, net FDI increased slightly to USD2.6bn from USD2.5bn in 1Q, led by financial services, retail, and auto parts sectors, while FDI by country decreased, mostly from ASEAN and the US (Exhibits 3 and Appendix). Other investments posted a USD0.3bn inflow, reversing from a USD4.2bn outflow, driven by lower resident placements abroad and withdrawals of external loans and deposits.
Broad-based net portfolio outflows. The net portfolio recorded hefty outflows of USD8.1bn from an inflow of USD1bn in 1Q, broad-based and led by SRBI and the equity market. SRBI saw USD2.7bn outflows from foreign investors, compared with a USD0.6bn inflow in 1Q, reflecting non-rollovers of maturing holdings. The equity market posted continuous outflows of USD1.9bn in 2Q, extending the trend from 4Q (Exhibit 4). Bond markets saw a net outflow of USD1.7bn, reversing from an inflow of USD2.6bn in 1Q. As a result, the overall balance of payments posted a USD6.7bn deficit, deeper than the USD0.7bn deficit in 1Q, consistent with lower BI FX reserves.
We continue to forecast a wider CAD in 2025. We expect a wider CAD of 1.1% of GDP in 2025 (BI: 0.5 1.3%) vs 0.6% in 2024, considering the potential impact of Trump s tariffs on China and other countries, which could exacerbate the global economic slowdown and further depress commodity prices. In terms of trajectory, we continue to expect a higher CAD in 3Q due to the impact of Trump tariffs, with the absence of dividend repatriation providing some offset. However, the extension of the US-China trade truce in August poses upside risks to our CAD forecast. In 2026, we expect the CA deficit to widen to 1.3% of GDP.
