Panama's Economy, Trade, Investment Incentives, GDP, and Future Economic Growth Outlook

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IMF

Posted 18/02/2020

Panama’s economy is is advanced "in its recovery process".  and  “we expect economic growth for 2020  to reach 4.8%  and climbing said The International Monetary Fund (IMF) following an on-site evaluation. 

"We see that there is a clear recovery in the economy. We expect that economic growth for this year will be of the order 4.8%," said the head of the IMF mission, Alejandro Santos. 

It is estimated that "good management of finances" will allow the Panamanian economy to grow at a rate of 5.5% in the medium term, Santos added.

The Panamanian economy has been decelerating which was accentuated in 2019 when it was expected to grow 3.5%, the lowest rate in a decade and as a result of the depletion of the economic model based on large public investments in infrastructure, economists told the  Efe News Agency.

The multilateral agency believes that this year the deficit and inflation "will remain under control and that the economy will continue to grow," after learning about the initiatives, policies, strategies and how the country will face global challenges.

During the year 2019, the fiscal deficit was controlled, which closed at 3.1% in accordance with official data, and it is expected that the budgeted amount will be achieved, thus aligning with the Fiscal Social Responsibility law, Santos added. .

The Vice Minister of Finance, Jorge Luis Almengor, stressed that the Panamanian Government is committed "to the prudent management of public finances, in order to resume the fiscal discipline required to comply with the Fiscal Social Responsibility Law, the Law of Budget and other laws applied in Panama. "

As part of the economic recovery plan, the Government of Laurentino Cortizopaid debts of $1.584 billion to suppliers, contractors, teachers, agricultural producers, banks and the Social Security Fund (CSS), according to the official information.

 

https://www.newsroompanama.com/business/panama-economy-heading-towards-55-growth-imf

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IMF: Panamanian Economy to Recover by 2020

For the international organization, after the economic slowdown in 2018-2019, the economy is expected to recover in 2020 and will continue to be among the most dynamic in Latin America.

Thursday, February 20, 2020

In the medium term, growth is expected to stabilize at its potential annual rate of 5% and inflation is also expected to rise to 1% in 2020, reported the International Monetary Fund after its last visit to the country.

See "Economy: Construction and Tourism to Boost Growth"

From the IMF report:

An International Monetary Fund team led by Alejandro Santos visited Panama from February 4 through 17 to conduct the discussions for the 2020 Article IV consultation. The team met with the Minister of Economy and Finance Héctor Alexander, Banks Superintendent Amauri Castillo, as well as other senior public officials and private sector representatives.

Following a temporary slowdown in 2018-19, the economy is poised for a rebound in 2020 and will remain among the most dynamic in Latin America. The outlook is positive, but the authorities should remain mindful of risks to growth stemming from both domestic and external factors. The new government’s strategy should aim at preserving Panama’s competitive advantage as an attractive business destination while focusing on social priorities to ensure sustainable and inclusive growth. With this goal in mind, Panama needs to enhance its productivity and competitiveness while improving social outcomes. Exiting the FATF grey list by strengthening the AML/CFT policies while enhancing tax transparency will be key to maintaining Panama’s position as a regional financial center. It is also increasingly important to reinforce fiscal discipline amid growing debt and underperforming revenues, in order to ensure both public debt sustainability and fiscal policy credibility. Given the importance of the financial system in the Panamanian economy, the authorities should continue to bolster systemic risk assessment, risk-based supervision and put in place robust frameworks for macroprudential policy and crisis management. Finally, against the backdrop of rising water demand and climate volatility, Panama needs to prioritize efficient resource management.

The economy is rebounding from a temporary slowdown

• Weaker activity in 2019. Real GDP grew by about 3 percent in the first three quarters of 2019 (y/y) amid easing in the construction and service sectors, following a slowdown in 2018 driven by a construction strike. However, there are indications that the economy began to recover in the last quarter as a new copper mine launched full-scale commercial production, and 2019 growth is estimated at 3½ percent y/y. The unemployment rate increased to 7.1 percent in August 2019 from 6 percent a year ago, reflecting less economic dynamism.
• Subzero inflation. CPI inflation remained persistently weak in 2019, staying below zero most of the year, closing at -0.1 percent (y/y) and averaging -0.4 percent.
• Stable fiscal deficit. The overall deficit of the NFPS reached 3.1 percent of GDP in 2019 (compared to 3.2 percent of GDP in 2018) as an underperformance in tax revenue and accelerated execution of spending by the outgoing administration required an expenditure tightening in the second half of 2019. The fiscal deficit for 2019 was below the 3½ percent limit established in the revised social and fiscal responsibility law (SFRL). The relatively high deficit, pre-financing operations, along with the payment of accumulated arrears in the amount of over 2 percent of GDP, led to an increase in Panama’s Central Administration debt burden to about 46 percent of GDP at end-2019, although it is close to 40 percent on a net basis.
• Improved external position. The current account deficit narrowed to an estimated 6.6 percent of GDP in 2019 (from 8.2 percent of GDP in 2018) aided by rising copper exports and remained financed mainly by foreign direct investment.

The outlook is positive, but the balance of risks is skewed to the downside

• Growth will recover, and Panama will remain among the most dynamic economies in Latin America. Output growth is projected to rebound to 4.8 percent in 2020, supported by full-scale copper production and robust private investment. Over the medium term, growth is expected to stabilize at its potential annual rate of 5 percent. Inflation is expected to pick up to 1 percent y/y in 2020 amid accelerating economic activity and stabilize at 2 percent y/y in the medium term. Meanwhile, the external position is projected to continually improve, reducing the current account deficit to 5 percent of GDP by 2023. The fiscal balance is also expected to gradually improve—in line with the amended fiscal rule—with the NFPS deficit converging to 2 percent of GDP by 2022.
• The balance of risks is tilted to the downside. Main domestic risks to growth are related to setbacks in exiting the FATF watchlist and complying with SFRL deficit ceilings, both of which could expose Panama to reputational damage and thus reduce its competitiveness and erode policy credibility of the new administration. Continued oversupply in the domestic property market could adversely impact financial stability and the real economy through a price correction and rising NPLs. Social tensions could disrupt economic activity and cause policy missteps. On the upside, copper exports could be more important than anticipated. Among external risks, the most notable ones are a slowdown in Canal activity, weaker-than-expected global growth, escalating trade tensions, the spread of the coronavirus as well as an erosion in competitiveness due to U.S. dollar appreciation. Other risks include a sharp tightening of global financial conditions leading to rising domestic interest rates which drive up debt service and refinancing costs. Cyberattacks can bring significant disruptions to digital infrastructure, while climate-change related weather events can adversely affect Canal activity, agriculture and tourism.

Enhancing the fiscal framework is needed to sustain budgetary discipline amid rising debt

• The envisaged fiscal consolidation is needed. To this end, the government modified the deficit ceiling under the fiscal responsibility law once again, to 3½ percent of GDP in 2019 followed by a gradual adjustment to 2 percent of GDP by 2022, which appears appropriate, and the limit has already been observed for 2019. Continued consolidation efforts are imperative to ensure debt sustainability, especially given the recent rise in public debt levels driven by a relatively high deficit, pre-financing operations and the borrowing needed to pay accumulated arrears which were unrecorded previously.
• A thorough assessment of the revenue potential and expenditure efficiency is required. Reform of tax and customs administrations, attending social needs, and improving the efficiency of public spending are imperative to sustain growth amid revenue shortfalls. In addition to improving the capacity of tax and customs administrations, action is required to review Panama’s complex tax exemptions that significantly erode the tax base. On the expenditure side, realigning current spending with social needs—including by investing more in education—and improving the effectiveness of social spending will be crucial to achieve sustainable and inclusive growth. Capital projects, including those executed through newly-established PPPs, need to be carefully assessed and prioritized going forward. Meanwhile, the pension system needs to undergo a gradual reform by better aligning incoming contributions with expected payouts amid shifting demographics.
• Measures to further reinforce the fiscal framework should be adopted. The authorities should recover their track record of fiscal discipline enabled by the fiscal responsibility law, by enhancing the fiscal framework and solidifying their commitment to sound fiscal policymaking. This would involve appointing the members of the fiscal council to further promote accountability and facilitate informed public debate on fiscal policy. In addition, over the medium term the new administration should consider adopting a structural rule to build fiscal buffers for economic downturns with the aim of making fiscal policy less pro-cyclical and therefore a more effective macroeconomic stabilization tool. Finally, the authorities should strengthen budgetary execution rules to avoid the recurrence of arrears while at the same time strengthen the recording of fiscal accounts by limiting the use of turnkey projects and deferred payment contracts in public investment projects.

Financial integrity and tax transparency frameworks should be enhanced

• Exiting the FATF grey list must remain a priority. Building on the momentum of recent legislative action, the authorities should continue addressing the deficiencies in Panama’s AML/CFT regulatory framework identified by the FATF. Specifically, the authorities should update the national risk assessment and the AML/CFT strategy, update the newly-created registry of beneficial ownership information for firms, and enforce legal action in cases of money laundering and unlicensed remittances. Upgrading the legal framework and its effectiveness is key to strengthening Panama’s position as a regional financial center. The ongoing efforts to increase public awareness of money laundering and other suspicious financial activity are welcome. Close cooperation and fluid communication with regional and international authorities on financial integrity will be needed to ensure a prompt exit from the grey list. 
• Efforts to further enhance tax transparency and information exchange should continue. On the back of recent progress in addressing the OECD Global Forum’s legal recommendations (which resulted in upgrading Panama to “partially compliant” with its global tax-transparency standard), the authorities should continue addressing the shortcomings identified in the agency’s 2019 review. Specifically, Panama should dissolve dormant entities and respond to exchange-of-information requests in a timely manner.

Financial sector reforms are needed to build resilience and monitor risks

• Upgrades to the financial surveillance toolkit are needed. With significant progress in the regulatory framework towards adoption of Basel III, the authorities should focus on macroprudential policy and further upgrading the regulatory toolkit. It would also be important to put in place an adequate liquidity support facility for banks and robust frameworks for crisis management, including by enhancing the range of resolution tools. To better monitor macrofinancial risks, data gaps with respect to granular information on household and corporate balance sheets and property prices should be addressed.
• The country has potential to develop the fintech sector. Adopting cybersecurity and fintech regulatory frameworks in line with international standards while capitalizing on Panama’s digital and mobile connectivity could place the country as a regional fintech hub.

Addressing structural needs and social priorities is urgent

• Implementation of structural reforms will be key to secure high potential growth. Sustaining high rates of growth will require continued improvements in productivity and competitiveness, a strengthening of policies related to labor mobility, governance and institutional capacity, and enhancing the innovation and technological sophistication in key industries. To remain an attractive destination for doing business, Panama needs to upgrade the skill level of its workforce, streamline the insolvency framework and improve the functioning of the judicial system. In addition, enhancing water management is vital both for the expanded Canal operations and a growing population, especially given the climate change risks.
• Social issues should be prioritized. It will be important to continue reforming social policies to maintain broad-based and inclusive growth, this requires strategic policy action in the areas of education (both access and quality), gender equality, social protection programs, and poverty reduction in the comarcas.

 

https://www.centralamericadata.com/en/article/main/IMF_Panamanian_Economy_to_Recover_by_2020

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Panama in 2019: Imports Fall 3%

During 2019, purchases abroad totaled Ch$12,836 million, which is 3% less than the amount reported in the previous year.

Monday, February 24, 202

The General Comptroller's Office reported that between 2018 and 2019 foreign purchases in the country decreased by $396 million, from $13,233 million to $12,836 million.

For the periods in question, imports of intermediate goods reported a decrease, in this case it was 4.5%, from $3,311 million in 2018 to $3,161 million in 2019.

In the case of purchases of consumer goods varied from Ch$6,366 million to Ch$6,258 million. Imports of capital goods also registered a decrease, in this case from Ch$3,557 million to Ch$3,417 million.

See full figures.

https://www.centralamericadata.com/en/article/main/Panama_in_2019_Imports_Fall_3

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Pet Market in Panama

Some pet service providers claim that their sales have been sustained, while others report that their income is beginning to recover after overcoming a period of economic slowdown.

Tuesday, February 25, 2020

In recent years the Panamanian economy recorded a slowdown, since in 2018 the Gross Domestic Product of the country reported a 3.7% year-on-year growth, far from the increases of 11.3% and 9.8% reported in 2011 and 2012, respectively.

It is estimated that in 2019 the increase in production will be between 3.5% and 4%, and for 2020 international organizations predict a more solid recovery.

In this context, local pet care entrepreneurs expect sales to rebound in the coming months.

See "Pets: Consumer Preferences"

Anny Duran, from Mascota Resort, told Panamaamerica.com.pa that "... in the last 5 years nine dog businesses that provided hairdressing services, hotel, veterinary clinic, food and accessories sales closed. I resisted having high operating costs, however, we are seeing some recovery in the business."

Also see "Pet Food: Business with Mexico Grows at 10%"

Maritza Douri, manager of the VIP Vacation Kennels Panama hotel, explained that "... despite the economic situation of the country, they do not report a drop in income either in high or low seasons (April to October). At the moment we have maintained our clientele in comparison to previous years. At times we have had to say that there is no space because we are full."

Source: Panamaamerica.com.p

a

https://www.centralamericadata.com/en/article/main/Pet_Market_in_Panama

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Panama: Labor Hiring Drops 16% in 2019

Last year, 216,198 work contracts were registered in the country, 16% less than the figure reported in 2018.

Thursday, February 27, 2020

Reports from the Ministry of Labor and Labor Development detail that between 2018 and 2019, the types of indefinite contracts registered a decrease, falling from 70,000 to 54,000.

The ministerial reports explain that fixed-term contracts also registered a decrease for the periods in question, falling from 112,824 to 101,443, and in the case of fixed-term contracts they fell from 74,505 and 60,564, respectively.

Regarding the proportion of temporary employment contracts, which takes into account those of a defined type and for completed work, they increased their proportion of the total for the periods in question, rising from 71% in 2018 to 75% in 2019.

See full figures.

https://www.centralamericadata.com/en/article/main/Panama_Labor_Hiring_Drops_16_in_2019

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Mining lifted Panama 2019 growth to 3 percent

Posted 02/03/2020

Panama’s  economy grew 3% in  2019, which meant an increase of $1.256.8 billion, to a gross domestic product (GDP), , of $43,061 billion.

In  the fourth quarter of 2019  the econoy was 3.3%, higher than the previous three quarters.

This growth was mainly due to the mining sector, which registered 45.4%,  specifically due to the increase in the activity of the extraction of copper concentrate in the second half of the year.

The transport, storage and communications category registered an annual increase of 6.8%, driven by the operations of the Panama Canal, which grew 6.3%, given the increase in tolls and ship services; the port system rose 7.7%, the general cargo 11.4%, and bulk cargo 16.7%.

The construction sector barely contributed 0.1%.  and activity in the Colon Free Zone

 

https://www.newsroompanama.com/business/mining-lifted-panama-2019-growth-to-3-percent

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Panamanian Economy Grows 3% in 2019

Last year, GDP amounted to Ch$66,801 million, and in real terms, production increased by 3% over that reported in 2018.

Wednesday, March 4, 2020

This 3.0% growth for 2019, in the amount of Ch$43,061.1 million (chained value to 2007), was mainly driven by the mining sector, reported the General Comptroller of the Republic.

The dynamism of the mining sector is specifically explained by the increase in the activity of the extraction of copper concentrate, whose production in tons increased from the third to the fourth quarter by 210%.

The report states that "... however, important sectors in the national economy decreased and others grew less in proportion to previous years, as is the case of the fishing sector which decreased by 25.1%, affecting the exportable production of that sector, likewise, the manufacturing sector fell by 1.5% and the construction sector contributed only 0.1%.

In the behavior of the economic activities related to the external sector, the Panama Canal, the port activities, air transportation, and the agricultural sector, the production of bananas continued to grow due to the activation of this important sector; however, the activity developed in the Colon Free Zone decreased, although it achieved a positive performance in the last quarter of the year."

See full report (in Spanish).

 

https://www.centralamericadata.com/en/article/main/Panamanian_Economy_Grows_3_in_2019

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Labor Recruitment Starts Down in 2020

During January of this year 30,270 work contracts were registered in the country, 11% less than the figure reported in the same period in 2019.

Thursday, March 5, 2020

The reports of the General Comptroller of the Republic detail that between the first month of 2019 and the same period of 2020, the types of defined contracts registered at the headquarters of the Ministry of Labor decreased from 8,730 to 7,094.

The reports explain that indefinite-type employment contracts registered an increase for the periods in question, rising from 4,111 to 4,453, and in the case of fixed-term contracts they fell from 5,689 to 3,751.

In relation to the proportion of temporary employment contracts, which takes into account those of a definite type and for finished work, they increased their proportion of the total in for the periods in question, rising from 71% in 2019 to 75% in 2020.

See full figures (in Spanish).

 

https://www.centralamericadata.com/en/article/main/Labor_Recruitment_Starts_Down_in_2020

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Hiring Expectations Still Declining

By the second quarter of 2020, 9% of companies in the country expect to increase their payrolls, which is less than the 10% recorded in the same period in 2018.

Thursday, March 12, 2020

Panamanian employers report moderate hiring plans for the second quarter of 2020, with 9% of employers expecting an increase in their workforce, 10% anticipating a decrease and 76% remaining unchanged, resulting in a Net Employment Trend of -1%, reported Manpower.

The report states that "... Employers in three of the four regions expect to reduce their workforces during the next quarter. Employers in Panama City report weaker hiring plans, with a -2% Net Employment Trend, while Trends in Colon and West are at -1%, on the other hand, employers in Central Provinces anticipate some hiring, reporting a +7% Trend.

By the second quarter of 2020, employers expect to reduce their workforces in four of the six sectors. The slowest pace of hiring is expected in Manufacturing, where the Net Employment Trend is at -6%. Weak Trends are reported in Construction and Agriculture, Fishing, Mining & Extraction, with -4% and -3%, respectively, while the Trade Trend is at -2%. On the other hand, Communications & Transport employers anticipate a weak labor market, reporting a 0% Trend, while Services employers expect some increases in their workforce, reporting a +7% Trend.

Employers in two of the four organization sizes expect to increase their workforces during the next quarters. The Net Employment Trend of +6% is reported by Medium-sized companies, while a Trend of +4% is reported by Large companies. However, Small and Micro companies expect to reduce their workforce, reporting Trends of -3% and -2%, respectively."

See full report (in Spanish).

 

https://www.centralamericadata.com/en/article/main/Hiring_Expectations_Still_Declining

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Coronavirus  reduces Panama  growth projections

Posted 13/03/2020

 The Bank of America in a Match 11 report   reduced projections of Panama's economic growth due to the coronavirus

The projection for 2020 decreased from 3% to 2.5%, and from 4% to 3.8% for the year 2021.

Panama is a country of service, and changes in supply chains and consumption patterns would be reflected in the behavior of the economy.

It is the most open economy in the region, with the commercial exchange of goods and services above 80% of gross domestic product. About 5% of world trade passes through the Canal; and the country also houses the second largest free trade zone in America, Colon Free Zone, says the.

Analysts believe the Panamanian economy can serve as a barometer to measure the pulse of world trade, drivers of the slowdown and disruption of global supply chains reports La Prensa

The bank expects economic activity to likely pick up in 2021, but also believes that disruption of global supply chains is the greatest risk for Panama.

The Canal represents 46% of the exchange trade between East Asia and the East Coast of the United States and is relevant in trade between South American countries along the Pacific (Chile, Peru, Ecuador, and Colombia) and Europe.

 

https://www.newsroompanama.com/business/coronavirus-reduces-panama-growth-projections

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Panama: Transportation Pressures Inflation Down

During February in the country the CPI reported -0.3% year-on-year variation, which is partly explained by the behavior of the prices of the transport category.

Friday, March 13, 2020

The groups that showed decreases in the National Urban CPI for February compared to January 2020 were: Transportation with 1.3%, Food and non-alcoholic beverages with 0.8%, Recreation and culture with 0.4%, Communications with 0.3%, Alcoholic beverages and tobacco, clothing and footwear, and Health all with 0.1%, reported the General Comptroller of the Republic.

The document states that "... The decrease observed in the Transport group, was due to the drop recorded in three of its seven classes. The greatest variation was in the class "Fuels and lubricants for personal transportation equipment" with 5.6%, due to the decrease in the price of automotive fuel.

The Food and non-alcoholic beverages group showed a decrease in nine of its eleven classes. The greatest variation was in the class "Meat" with 1.9%, due to the decrease in the price of chicken meat. The Recreation and Culture group showed a decrease in seven of its sixteen classes.

The greatest variation was in the "Tourist Packages" class with 6.5%. The drop reflected in the Communications group was due to a decrease in one of its two classes, "Telephone Equipment" with 2.6%."

See full report (in Spanish).

 

https://www.centralamericadata.com/en/article/main/Panama_Transportation_Pressures_Inflation_Down

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Panama: Economic Activity Begins 2020 Upwards

During January of this year, the Monthly Index of Economic Activity reported a 2.7% year-on-year increase, which is partly explained by the behavior of trade, transport and storage.

Friday, March 20, 2020

Among the categories of economic activity that showed a positive behavior were: commerce, transportation, storage and communications, financial intermediation, agriculture, electricity and water, mining and quarrying, and domestic services, reported the Comptroller.

The report states that "... The commercial activity registered a slight performance, due to the greater demand of the local wholesale and retail trade.

Transportation and communications services showed a good performance, favored by the operations of the expanded Panama Canal and the container movement of the National Port System in TEU and telecommunications.

The agricultural sector showed an increase in items such as cattle and poultry farming, banana cultivation, mainly for export.

The electricity and water supply category showed a positive performance due to the increased generation of thermal energy with the participation of new electricity generation, from natural gas."

See full report (in Spanish).

 

https://www.centralamericadata.com/en/article/main/Panama_Economic_Activity_Begins_2020_Upwards

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Pandemic sends revenue plunging after boom months

Posted 06/05/2020

Government revenue, a victim of the pandemic fell $562.7 million below budget projections for the months of March and  April  reports the Ministry of Economy and Finance (MEF).

It was scheduled to collect $ .1,244.1 billion but reached only $681.5 million.

I n the months of January and February, before the COVID-19 impact,

the revenue collection of the Central Government was  11.7% higher than the budget schedule.

 

https://www.newsroompanama.com/business/pandemic-sends-revenue-plunging-after-boom-months

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World Bank forecasts 7.2% drop in GDP in worst crisis since 1870

World Bank HQ

Posted 08/06/2020

The coronavirus pandemic has plunged the world economy into the most widespread crisis since 1870, the World Bank warned on Monday.

The agency expects a  7.2% drop in GDP in Latin America and a contraction of the world economy of 5.2% in 2020.

"The pandemic represents the biggest economic blow that the world has experienced in decades, causing a collapse of global activity," the Bank said

The contraction of the world economy will lead to the worst recession in 80 years, but the fall in gross product per capita is the most widespread since 1870 due to the number of countries affected.

This crisis can drag 70 to 100 million people into extreme poverty, a figure higher than the bank's previous estimate that projected that 60 million people were at risk.

China growth
According to the Bank forecasts, China will register a growth of 1%, in contrast to the contraction of 6.1% in the United States, 9.1% in the Euro Zone and 6.1% in Japan.

In Brazil - the third country with the most deaths after the United States and the United Kingdom, with nearly 36,500 deaths - the World Bank expects a contraction of 8% of GDP, while for Argentina the entity projects a GDP retraction of 7.3% and 7.5% for Mexico.

he bank noted that the impact in Latin America is more pronounced than the collapse suffered during the global financial recession of the past decade or during the debt crisis of the 1980s.

The abrupt slowdown in the United States and China disrupted the supply chain for Mexico and Brazil, and caused a sharp drop in exports in countries like Chile and Peru, the Bank explained.

Central America
In Central America, the shock came through the severe contraction in the United States that affected trade and migrant remittances. In Mexico and the Caribbean, the blow also came due to the collapse of the tourism industry.

The Bank expects a contraction of GDP per capita in 90% of emerging countries and fears that this will drag "millions of people into poverty."

The report warned that emerging markets will also be hit by weaker growth in China and a collapse in global demand for raw materials, especially oil.

 

https://www.newsroompanama.com/world/world-bank-forecasts-72-drop-in-gdp-in-worst-crisis-since-1870-1

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Dark Economic Outlook

The World Bank projects that the Central American economy will contract by 3.6% this year, due to restrictions on movement, a decline in remittances and tourism, and a drop in agricultural prices.

Tuesday, June 9, 2020

The sudden and widespread impact of the coronavirus pandemic and the measures taken to contain it have caused a drastic contraction in the global economy, which, according to World Bank forecasts, will shrink by 5.2% this year, the bank reported on June 8.

The effects are being particularly severe in the countries most affected by the pandemic and those that depend heavily on international trade, tourism, commodity exports and external financing.

The report states that "... The risks facing the region's outlook are clearly unfavorable. A worsening of the outbreak would put pressure on health systems and be devastating for countries with limited health care capacity. Outbreaks of the virus in the region's large economies could have a spillover effect, and a second wave of the pandemic in advanced economies would have negative repercussions in the region."

See "Economic Growth: Outlook for the Region"

According to the projections published in June by the World Bank, the outlook is worse for some economies when compared to that predicted by the same organization in April, as El Salvador went from -4.3% to -5.4%. Nicaragua went from -4.3% to -6.3%, and Honduras from -2.3% to -5.8%.

In the case of Guatemala, the fall would almost double, since in April the forecast was that the economy would shrink by 1.8% in 2020 and in June the estimate changed to a decrease of 3%.

The forecasts for Costa Rica and Panama remained unchanged. See the comparative table of forecasts published by the World Bank.
 

Country	Outlook for 2020, published in April	Outlook for 2020, published in June
Costa Rica	-3,3%	-3,3%
El Salvador	-4,3%	-5,4%
Guatemala	-1,8%	-3,0%
Honduras	-2,3%	-5,8%
Nicaragua	-4,3%	-6,3%
Panamá	-2,0%	-2,0%

See "Regional Outlook" as of June 2020.



 

https://www.centralamericadata.com/en/article/main/Dark_Economic_Outlook

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Economy: Effective Reactivation to Mitigate the Crisis

Full opening by regions and not by blocks, reactivation of construction and the establishment of an emergency financial assistance plan are some of the proposals of the Panamanian business sector to face the economic and health crisis.

Monday, June 15, 2020

For the Panamanian Association of Business Executives (Apede) the confinement measures do not manage to stop the advance of covid-19 transmission, but they do cause negative effects on employment levels in the country.

Check out the "System for monitoring markets and economic situation in Central American countries", developed by CentralAmericaData.

If the economic activity continues with this trend, at the end of 2020 the economy will be facing an imminent disaster, with the loss of between 250,000 and 300,000 jobs, explains a statement from the Apede.

Laestrella.com.pa reviews that Apede estimates that MSMEs will be among the most affected in this crisis "... since they generate 59% of all jobs in the private sector, both formal and informal, and provide three out of every five new jobs generated in the last 5 years."

The Apede proposes that important aspects for the reopening of the economy should be analyzed, among which the following stand out:

"-Full opening by regions. The block reopening scheme does not allow for effective reactivation, since many companies that have been allowed to open depend on the demand that will be generated by the activation of other blocks, preventing the expected reincorporation of workers.
-Reactivation of the construction sector due to its multiplying effect on the generation of jobs and its low risk of contagion, versus other activities, as it is developed in open spaces.
-Establish a detailed plan for emergency financial assistance through the banking sector that will make viable actions for the reopening and economic recovery of the most affected sectors and companies."

Source: laestrella.com.pa

 

https://www.centralamericadata.com/en/article/main/Economy_Effective_Reactivation_to_Mitigate_the_Crisis

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Economic Activity: Historic Decline in Panama

During April 2020 the Monthly Index of Economic Activity in the country reported a 35% year-on-year variation, a fall that is explained by the restrictions imposed following the outbreak of covid-19.

Monday, July 6, 2020

The most affected activities were: Construction, Hotels and Restaurants, Commerce, Manufacturing Industry, Other community, social and personal service activities, among others. And to a lesser extent the sectors of Fishing, Real Estate, Business and Rental Activities, Supply of Electricity, Gas and Water, Financial Intermediation, reported the General Comptroller of the Republic.

Check out the "System for monitoring markets and economic situation in Central American countries", developed by CentralAmericaData.

The official report explains that there were sectors that showed positive behavior such as: mining activity, transportation and communication services, favored by the operations of the expanded Panama Canal, the movement of containers of the National Port System in TEU and telecommunications. Likewise, the agricultural sector showed an increase, favored by the production of bananas and cattle.

The Monthly Index of Economic Activity (IMAE) in the Republic, accumulated January - April 2020, registered a 7.4% decrease compared to the same period in 2019, the report states.

See full document (in Spanish).

 

https://www.centralamericadata.com/en/article/main/Economic_Activity_Historic_Decline_in_Panama

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Panama facing major recession after 31 years of growth

A shuttered economy

Posted 17/07/2020

With  the health crisis lasting longer than expected the  Economic Commission for Latin America and the Caribbean (Eclac),  predicts that the Panama economy will register a contraction of 6.5% this year, four and a half points, more than expected in April ending 31 years of growth.

 Manuel Ferreira, director of the Center for Economic Studies of the Chamber of Commerce, Industries, and Agriculture, said last June that the annual contraction of the economy could reach levels between 7% and 10%.

Former Vice Minister of Economy, Domingo Latorraca, estimated this week that the drop could be 4.5%, while economist Felipe Chapman recently projected a contraction of 4%, although he anticipated that it could be revised downwards again.

The magnitude of the contraction will ultimately depend on how long the confinement and the stoppage of activities are prolonged, in addition to the effectiveness of the measures to promote economic recovery.

What seems inevitable is that the country will experience the first recession after 31 consecutive years of growth.

Projections for the entire continent and for other regions of the world are more discouraging.

Latin America and the Caribbean as a whole will decrease 9.1%, with marked contractions in large economies, such as Argentina (10.5%), Brazil (9.2%) and Mexico (9%). Even deeper will be the recessions in Peru (13%) and Venezuela (26%).

ECLAC notes in its report that, for the first time in decades, the Chinese authorities have not set an annual growth target, and the expansion of the economy is expected to be 1%, the lowest rate in more than 40 years. For the United States, the Federal Reserve projects a fall of 6.5%, while the European Central Bank forecasts an 8.7% reduction in GDP in the euro area.

The fall in all regions will imply a substantial loss of employment. For Panama, the unemployment rate is estimated to climb from 7% to a rate of between 15% and 20%, according to central government estimates leaving some 400,000 jobless.

 

ahttps://www.newsroompanama.com/business/panama-facing-major-recession-after-31-years-of-growth

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Major US Bank lowers  projection for Panama but brighter future

Posted 22/07/2020

The Bank of America has revised downward its projection for the Panamanian economy for 2020 and predicts that the gross domestic product (GDP) will contract 10%, a far deeper fall than the 4% previously forecast but  has better prospects for emerging from the crisis than most Latin American countries.

The revision follows  the sharp drop expected for the second quarter, in which many activities have been paralyzed, and the extension of confinement in the fight  to contain the spread of COVID-19

The report indicates that the year will be difficult for Panama, as for the rest of world, and it highlights that the country has better prospects for emerging from the crisis than the vast majority of Latin American countries, “with positive growth estimates for the coming years (5.5% by 2021) and a level of debt that, despite the increase "It will remain at moderate levels when compared to other emerging markets."

The bank says that "the government moved quickly to cover its financing needs," something that other countries in the region did not do. Although a downgrade in the risk rating could happen in the next twelve months, the country would maintain the investment grade, supported by greater diversification of the economy, market policies and stable governance.

As“the most open economy in the region”, the country will be able to benefit from a rebound in world trade. In addition, the economy will also benefit from greater diversification since the Colón copper mine began operations, an activity that generated a contribution of one percentage point in GDP growth last year.

 

https://www.newsroompanama.com/business/major-us-bank-lowers-projection-for-panama-but-brighter-future-1

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Housing: How Much Could Prices Fall?

Entrepreneurs in the real estate sector estimate that in the Panamanian market the prices of homes in inventory could fall between 5% and 10%, due to the economic crisis resulting from the outbreak of covid-19.

Tuesday, July 21, 2020

Although the construction industry is currently paralyzed because of the health emergency and the supply of new housing is not increasing, entrepreneurs anticipate a fall in the prices of residential property.

You may be interested in "Real Estate Supply: How do Prices Behave?"

Ivan Carlucci, president of the Panamanian Association of Real Estate Administrators (Apadi), told Panamaamerica.com.pa that he does not believe that "... the decrease in price is of a permanent nature or that it will last beyond the time of the pandemic. It has become evident that there is a need for homeownership, which is fundamental."

Carlucci added that "... the price of products under construction is not going to go down, because there is a financing component to that. "The market is going to recover as it has in the past."

CentralAmericaData reports that in the Panamanian market, of the total number of consumers who are looking to buy or rent a residential property through the Internet, 7% are trying to buy a house.

Source: Panamaamerica.com.pa

 

https://www.centralamericadata.com/en/article/main/Housing_How_Much_Could_Prices_Fall

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Panama economy back to prepandemic levels in 2022 - Cortizo

Posted 30/07/2020

Panama's economy will fall 9% in 2020 and will recover expand by 4%, in 2021, says a revised government forecast issued Thursday. July 30.

the Ministry of Economy and Finance (MEF) put the drop in GDP this year at 2% due to the COVID-19 pandemic

"In its estimates, the Ministry of Economy and Finance of Panama considers that, although the country will have a decrease of 9% in this 2020, a recovery of 4% is estimated for 2021," President Laurentino Cortizo said Thursday. , in a speech to businessmen.

The new forecast of the Panamanian Executive is close to that released last week by Bank of America, which calculates a drop of 10% for Panama's GDP, and short of that of the Economic Commission for Latin America and the Caribbean (ECLAC),- 6.5%.

Cortizo told members of the Panamanian Association of Business Executives (Apede) that this year it is estimated that the drop in the current income of the Central Government will reach $3 billion.

After 143 days of the pandemic, Panama accumulated until Wednesday 63,269 confirmed cases of COVID-19 and 1,374 deaths.

Cortizo highlighted the country's growth potential for 2021, including a macroeconomic position that will allow it to take advantage of the reactivation of world trade,  he said and pointed to the Bank of America, which calculates a growth of 5.5% for Panama in 2021.

He also highlighted the analyzes that place the country as one of the few that by 2022 could have the economy back to pre-pandemic levels.

In the past decade, Panama was one of the most booming economies in the region due to investment in large public infrastructure works, but for more than five years GDP  expansion of has slowed.

 

https://www.newsroompanama.com/business/panama-economy-back-to-prepandemic-levels-in-2022-cortizo

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Business leaders condemn inaction on economy crisis

The homeless population is expanding

Posted 09/08/2020

Panama’s Chamber of Commerce, Industries and Agriculture came out swinging on  Sunday, August 9, calling for action to address the economic crisis that the country's families are facing.

"If the lack of urgency in addressing economic issues and the review to gradually lift current restrictions persist, the negative effects of the pandemic will continue to increase, with the consequent impact on the Panamanian family, which sees its sustainability diminish every day," said. the business union.

Unemployment
"Unemployment in the formal sphere reaches alarming figures, to which is added the closure of companies, a situation that worsens as the days go by. Panamanians have been forced to seek sustenance in the informal sector, ”the statement added.

Entrepreneurs also expressed concern about a 3.3% increase in the state budget, which is confident about the recovery of the private sector. "But we know that such performance depends on reopening and economic reactivation plan with metrics that must be made visible as soon as possible. The more time passes, the more difficult it will be for companies to recover or even reopen; consequently, impacting the projected income to support this bill ”, said the Chamber.

It ends  by reiterating their commitment to face the situation from the private sector and emphasizing that prompt and responsible reactivation is required in the country to preserve health and promote a return to activities that are essential to generate jobs.

 

https://www.newsroompanama.com/business/business-leaders-condemn-inaction-on-economy-crisis-1

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OPINION : We will recover  -- if they let us

Protests have been sidelined

Posted 19/08/2020

According to the Constitution, Panama is a Republic and we are all citizens with rights. In practice, the Government believes that it grants us privileges. Through decrees, it decides when it is legal to take children to the park, exercise outdoors or even work. And it is not about anything, but the appropriation of the most sacred of life in freedom. Faced with the health crisis, the government of President Laurentino Cortizo decides in a whimsical way and without further argument or logic how to live. To complicate the situation, the Executive, which should be controlled and limited by the checks and balances established by the Constitution, rides like a horseman without any control or questioning, more than that of the citizens who, already tired of so much arbitrariness, take to the streets to protest, at the risk of being beaten or sanctioned for exercising their civil rights. Abuses, inconsistencies, arbitrariness, antics and irregularities perpetrated by a group of wolves calling themselves authority abound. The humiliations to the population and the announcements that end up being inconclusive and full of contradictions only increase the frustration. Economic uncertainty is at its highest since 1989. True, life goes on and we will recover as we have before, if they let us.-LA PRENSA. Aug. 19

 

https://www.newsroompanama.com/opinion/opinion-we-will-recover-if-they-let-us

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Urgent Need to Reopen the Economy, but Without Bureaucracy

After five months of implementing measures to mitigate the covid-19 outbreak, the business sector in Panama is calling for the removal of unreasonable, technical and unconstitutional restrictions that are working against the success of economic and social recovery.

Thursday, August 20, 2020

So far, Panama is the country that has registered the most abrupt fall in its level of economic activity in Central America, with a -41% year-on-year variation in the IMAE in May 2020.

The number of people who moved to locations identified as supermarkets or pharmacies is another data that shows that the quarantine in Panama has been one of the strictest. Reports from CentralAmericaData indicate that as of July 10, the country reported a 44% drop in the level of concentration of people in these types of establishments, compared to the levels registered in the last week of February. This reduction is the worst reported in all of Central America.

In this scenario, the Chamber of Commerce, Industry and Agriculture of Panama (CCIAP) calls for the reopening of the economy, but without bureaucratic ties or measures that do not adhere to legality and due process.

Check out the "System for monitoring markets and the economic situation in Central American countries", developed by CentralAmericaData.

Jean-Pierre Leignadier, president of the CCIAP, said that "the continuity of restrictive measures, without logical and technical support and with signs of unconstitutionality operate against the success of economic and social recovery, and the bureaucratization of the opening of activities is a contradiction to this reactivation."

Leignadier added that "... the country has been suffering for five months from extremely strict confinement, with little comparison to any other country in the world; parallel to an equally severe restriction of economic activities. After so many months, the only realistic option for economic recovery and job preservation is a responsible opening, where both the private and public sectors can seek a balance in health, social and economic matters. The truth is that we can't wait any longer."

The CCIAP statement issued on August 20 explains that "... the union considers that even though some measures to ease restrictions on mobility and the operation of economic activities have been announced, these are not enough, and have led to countless legal questions as they affect citizens' rights."

 

https://www.centralamericadata.com/en/article/main/Urgent_Need_to_Reopen_the_Economy_but_Without_Bureaucracy

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Panama jobless over 531,000 in December

Posted 08/09/2020

Over  531,000  Panamanians,  a quarter of the workforce, will be without jobs by year-end as the unemployment rate jumps from 7% in 2019 to 25%  erasing eight years of growth according to Minister of Labor and Labor Development, Doris Zapata.

When the pandemic started  there were `146,000 unemployed out of an economically active population of about 2.1 million people.

Last year the country experienced double-digit unemployment was 2004 when the rate reached 11.4%.

 The most dramatic year, was 1989, when it reached 18.9%, in the midst of the economic and institutional crisis caused by the US invasion.

Current projections indicate that Panama will face an unprecedented job crisis. leaving the country with  the same number of workers as there were in 2012.

 

https://www.newsroompanama.com/business/panama-jobless-over-531000-in-december