MANILA -- The Philippine economy will likely contract by 2 to 3.4 percent this year, according to revised government assumptions released Wednesday, as the country moved to slowly restart businesses shuttered by the COVID-19 pandemic.

The disease, which forced a lockdown in Metro Manila that will stay until May 31, will likely cause up to P2 trillion in economic losses, equivalent to 9.4 percent of gross domestic product, the Department of Budget and Management said.

The enhanced community quarantine in the capital will be eased on May 16 for the first time in 2 months, allowing some businesses to resume at 50 percent capacity. Laguna and Cebu City will also be placed under modified ECQ.

Metro Manila accounts for roughly a third of GDP and is home to a tenth of the Philippines' 100 million people. The economy contracted by 0.2 percent in the quarter ended March, the first contraction in 22 years.

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"These adjustments reflect the Duterte administration’s priorities of saving lives and protecting communities, while providing support to vulnerable groups and stimulating the economy to create jobs and support growth," according to the DBM statement.

"These revised assumptions will also allow the government to operate with a more realistic and prudent fiscal stance as it flags the downside risks to the economy and the fiscal program for the rest of the year," it said.

The Development Budget Coordinating Committee or DBCC, composed of the finance, budget and economic development departments and the central bank, sets the country's macroeconomic assumptions. These assumptions, in turn, help guide policy.

The "timely implementation" of "well targeted" recovery program in tandem with the private sector will help tame the virus fallout, the DBM said.

Finance Secretary Carlos Dominguez unveiled Tuesday a 5-point plan to stimulate the economy, including reviving President Rodrigo Duterte's P8-trillion infrastructure program and hiring contact-tracers "en masse."

Bangko Sentral ng Pilipinas Governor Benjamin Diokno said a supplemental budget to the P4.1 trillion 2020 national spending plan was needed to protect jobs.

Dominguez said up to 1.5 million jobs was temporarily lost while Labor Secretary Silvestre Bello III said up to 2.5 million workers were displaced temporarily or permanently.

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The price range assumption for Dubai crude was lowered to $23 to $38 per barrel this year and $35 to $50 next year until 2022, according to the statement.

Exports and imports are expected to contract this year by 4 percent and 5.5 percent, respectively, it said.

The peso-dollar exchange rate assumption for 2020 to 2022 was set to P50 to P54.

The inflation target range was kept at 2 to 4 percent while the projection for the full year was set at 1.75 percent to 3.75 percent.

The DBCC also lowered the revenue collection target to P2.61 trillion from P3.17 trillion.

Next year's cash budget was lowered to P4.18 trillion from P4.64 trillion due to lower revenue expectations.

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