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Icefi recommends Panama tax reforms that promote education and health

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Icefi recommends Panama tax reforms that promote education and health

Wed, 04/25/2018 - 12:01


Panama, the country with the greatest prospects for economic growth in Central America, should take advantage of its boom to implement tax and economic reforms aimed at supporting education at all levels, as well as the health system.

The director of the Central American Institute for Fiscal Studies (Icefi), Jonathan Menkos, told Acan-Efe that bolstering the coverage and quality of the education system in general, improving the health system and continuing to strengthen institutions, is the way that must be followed by Panama to "consolidate a competitive, stable and successful economic model in the creation of well-being".

"In these booming moments", with perspectives of growth of the gross domestic product (GDP) of 5.6 and 5.8 percent for this year and 2019, respectively, according to the most recent projections of the International Monetary Fund (IMF) ), "it would be very strategic to make some fiscal and economic reforms that will help" boost the education and health systems, Menkos said.

The IMF projections for 2023 give Panama an expansion of GDP of 5.5 percent, which places the country as the only one in Central America with growth above 5 percent.

The Government of President Juan Carlos Varela promotes an educational reform with the gradual implementation of the extended day and bilingual education, a process that has been developed slowly and with criticism from teachers' unions that claim improvisation and lack of infrastructure.

Based on estimations of the Monetary Fund, Menkos said that "Panama will continue to have a very dynamic economy, driven by the good performance of businesses around the Canal, the dynamics of the financial sector and maintenance, although at a lower level than in previous years".

In the last decade, Panama averaged a 6.9 percent GDP increase, growing to double-digit growth in 2012 (10.6 percent) driven by the expansion project of the Panama Canal, with a cost of at least $5,600 million.

Menkos added that "everything seems to indicate" that Panama "will continue to receive about 50 percent of direct foreign investment (FDI) that reaches the Central American isthmus", an indicator that in 2017 totaled $5,319.2 million for the country, with rise of 1.8 percent over the previous year, according to official data.

"Despite the good winds for economic activity," the public policy expert noted that unemployment "in Panama" has remained stable, around 6%, affecting more the urban population and women.

"This is explained because the most dynamic economic sectors at present are not very intensive in the use of workers" and because the "construction, which demands" labor, is less dynamic than in previous years," said the director of the Icefi, an economist with a master's degree in Government and Public Policies in Latin America from the Pompeu Fabra University / IDEC in Barcelona.

The Center for Economic Studies of the Chamber of Commerce, Industries and Agriculture of Panama, one of the main business leaders of the country, estimates for this 2018 a GDP growth of 5.4 percent and an unemployment rate of 6.3 percent over the 6.1 percent registered until August 2017, the most recent official rate.

"The Panamanian economy continues to grow below the optimum level of 6.5 percent" of the annual GDP, according to an analysis by the Center for Economic Studies of the Chamber.

Panama's economy grew by 5.4 percent of GDP in 2017, over 5 percent of the previous year, boosted by activities related to the external sector such as the interoceanic canal and air and financial services.

Panama seeks to consolidate itself as a center for connections and logistics, for which it develops an ambitious expansion of its main airport with an investment of some $800 million, builds a convention center and cruise port in one of the entrances of the Canal, and promotes the modernization of its financial center, among other projects.



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