PASSENGERS wearing masks for protection against the coronavirus disease wait for a jeepney in Quezon City, July 3. — REUTERS

THE ECONOMY could contract by as much as 4.5% this year as the rise in coronavirus infections and implementation of lockdown measures continue to dent consumption, Moody’s Investors Service said.

“In light of the continuation of containment measures and a continued deterioration in external demand, we now forecast real GDP (gross domestic product) growth in the Philippines at -4.5% for 2020, rebounding to 6.5% in 2021,” Christian de Guzman, Senior Vice-President, Sovereign Risk Group at Moody’s said in an e-mail to BusinessWorld.

The new projection is worse than the -2% that Moody’s gave in May and a reversal from the 6.2% it gave last year. Meanwhile, the 6.5% growth outlook for 2021 is slightly faster than the previous 6.4% projection.

Fitch Ratings earlier gave a -4% forecast for the Philippine economy, while S&P Ratings projected -3% for this year.

The government, on the other hand, expects GDP to contract by 2-3.4% this year. In the first quarter, the economy shrank by 0.2% on the impact of the Taal Volcano eruption, the coronavirus pandemic and the subsequent lockdown in mid-March.

“Our lower growth forecasts also reflect a view of a less robust recovery over the second half than previously expected, in part reflecting how the ongoing rates of infection have precluded a more decisive move away from the various stages of community quarantine,” Mr. De Guzman said.

Restrictions have been gradually eased since May to allow the resumption of businesses. Most areas in the country are now either under modified general community quarantine or general community quarantine except for Cebu City, now considered the epicenter of the outbreak.

Since the easing of the lockdown, coronavirus infections have continued to accelerate. On Sunday, the Health department announced 2,434 new cases, the highest single-day tally so far. This brought total confirmed patients to 44,254, with recoveries at 11,942. The death toll stood at 1,297.

“Greater progress on lowering rates of infection — both in the Philippines and abroad — may be the most important determinant shaping the strength of the recovery,” Mr. De Guzman said.

A better handling of the pandemic will also bode well for employment of overseas Filipino workers (OFWs), he added.

More than 68,000 OFWs have already been repatriated as of July 4, data from the Department of Foreign Affairs showed.

“More effective containment of the global outbreak that leads to a normalization in the cross-border movement of people will also allow for the resumed deployment of OFWs, not to mention stem job losses and wage cuts to existing OFWs,” Mr. De Guzman said, noting that travel and tourism will also improve once this happens.

The country relies heavily on OFW cash remittances, which supports consumption that makes up 70% of the economy. In March, cash remittances dropped by 4.7% to $2.397 billion due to the pandemic and tensions in oil-producing countries.

The central bank now expects cash remittances to decrease by 5% this year, a reversal from the 2% growth forecast in May as well as the 3% estimate in November.

Mr. De Guzman said the outlook looks grim for many sectors of the country’s consumption-dependent economy.

“Restrictions on movement will weigh on related sectors such as wholesale and retail trade; increased government spending, including on infrastructure, and monetary easing to boost private investment may also be less effective in providing countercyclical stimulus in the context of social distancing,” he said. — Luz Wendy T. Noble