Think tank Moody’s Analytics on Tuesday said the Philippines and its heavily populated neighboring countries in Asean were facing risks from new COVID-19 strains, hence should proceed with caution while further reopening their economies.

“While the current wave of the Delta variant is ebbing, the rapid response by policy-makers to ease movement restrictions could set the region up for another as-yet-unknown variant. The Philippines, Vietnam, Indonesia and Thailand are the most vulnerable given their low vaccination rates to date,” Moody’s Analytics chief Asia-Pacific economist Steven Cochrane said in a report.

Moody’s Analytics noted that the Philippines was already “instituting more targeted movement-control orders, even as its daily caseload and coronavirus-related fatalities remain very high.”

The government now implemented granular lockdowns instead of blanket quarantine restrictions, partly to encourage more consumer spending.

Moody’s Analytics projected the Philippines’ gross domestic product (GDP) growth in 2021 at 4 percent, the lower end of the government’s downgraded 4 to 5 percent target range.

For 2022, Moody’s Analytics estimated the Philippines’ growth rate at a faster 6.4 percent, although below the government’s 7-9 percent goal.

Alongside higher economic growth, the unemployment rate was expected to improve to 8.1 percent this year and 6.9 percent next year from the 15-year high of 10.3 percent in 2020.

But Moody’s Analytics said that across the Asia-Pacific region, “a greater near-term threat is rising inflation.”

It projected the Philippines’ headline inflation to average 4.1 percent this year, above the government’s 2-4 percent target band of manageable price hikes.

Inflation in the Philippines was seen returning to a within-target 3.5 percent next year.

“At this point, inflation exceeds central bank target rates in only four Asia-Pacific countries—Australia, New Zealand, South Korea and the Philippines … With the Philippines’ position as the weakest-performing Asia-Pacific economy, its monetary policy will remain on hold for most of the coming year,” Moody’s Analytics said.