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OPINION: Panama’s failing competitive  grade

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The fall in the global competitiveness index, a tool that seeks to identify and compare the ability of countries to provide development opportunities to their citizens, deserves the attention of the present authorities and those who aspire to replace them after 2019. Some years, only Chile was located above Panama. Today, a handful of countries in the region obtain better results than ours. The fall in itself is alarming because it is observed in almost all the aspects analyzed, but it is even more so if we take into account that Panama’s gross domestic product has been growing at a faster pace than the economies of the countries that today outperform us in this index. That has only one reading: Panamanians have not known how to take advantage of wealth. We have not transformed it into stronger institutions or better-trained citizens. We have not invested enough in science and technology. In summary: we have grown more than we have progressed. Let’s take note and, instead of distracting ourselves by looking for justifications, we propose to improve these results.-LA PRENSA, Oct. 17


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Low Investment Expectations

In Panama, 77% of companies do not plan to make new investments during the fourth quarter of the year, and 38% do not intend to hire more employees.

Friday, October 19, 2018

According to a survey conducted by the Center for Economic Studies of the Chamber of Commerce of Panama, 10% of the companies surveyed expect to increase staffing, 50% will remain the same, while 2% do not know.

In this regard, the president of the National Council of Private Enterprise (Conep), Severo Sousa, told Panamaamerica.com.pa that "... Historically, a pre-electoral year is one of recession and, under these conditions, it will be difficult for companies to be able to increase their payrolls, but rather they will take care of the ones they have and in some cases reduce them in order to face the fall in income that they are having."

Sousa added that "... This in turn will result in the economy flowing more slowly, because having more people on the street with no income is less expenditure they can make and less money flowing."



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Construction in Panama: Negative Figures Continue

In the first nine months of 2018, the cost of new construction, additions and repairs decreased 40% with respect to the same period in 2017, reaffirming the trend shown since last year.

Thursday, November 1, 2018

The latest figures from the General Comptroller detail that between January and September of this year the cost of new constructions, additions and repairs totaled $991 million, and the number of projects for which construction permits were granted was 7,557.

You may be interested in "Central America: $760 Million in Hospital Projects"

The figures for the first nine months are far from those reported up to September last year, when the value of the projects was more than $1,641 million, and the number of projects exceeded 10,000.

Also see "Public Works: $1.1 Billion in New Projects"

During the first nine months of this year, Panama was the most expensive province in terms of new construction, additions and repairs, with a total of $637 million and 964 thousand square meters. It was followed by La Chorrera, Arraijan and Colon, with $89 million, $81 million and $77 million, respectively.

See report of the General Comptroller.



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Panama's economy grows by 3.7% in the first half of 2018

Wed, 11/07/2018 - 14:01


Panama's economy grew by 3.7 percent in the first half of this year, compared to the same period in 2017, driven by transport, financial intermediation and trade sectors, according to data from the National Institute of Statistics and Census (Inec) released today.

The growth shows a clear slowdown compared to the rate of 5.8 percent of the first half of 2017, a behavior that has been attributed to a slowdown in key sectors, including construction, which experienced a one-month strike for wage claims between last April and May.

An International Monetary Fund (IMF) mission said last October in the Panamanian capital it estimated that the Panamanian gross domestic product (GDP) would expand by 3.7 percent in the first half of this year.

The multilateral institution added in a preliminary report, after undertaking a visit to the country, that "despite the temporary slowdown in 2018, the economy is on track for a rebound in the short term and will remain among the most dynamic economies in Latin America."

Panama’s  Inec stated that the highest accumulated growth in the first semester was recorded by fishing (15.2 percent); transport, storage and communications (7.3 percent); wholesale and retail trade (3.9 percent); financial intermediation (3.9 percent); agriculture, livestock, hunting and forestry (3.7 percent); electricity, gas and water (3.3 percent); and real estate activities (3 percent).

Construction grew 2 percent; mine and quarry exploitation by 2 percent, and the manufacturing industry by 1.6 percent, while hotel and restaurant sector recorded a contraction (-3.2 percent) and taxes on net products of subsidies (-2.7 percent).

Inec said that GDP expanded by 3.1 percent in the second quarter of this year, compared to the same period of 2017, and registered an amount of 10,084.3 million dollars.

Between April and July, the activities related to domestic economy that had a positive performance were transportation and communications; financial intermediation; trade; government services; health and education.

Meanwhile, the external activities that showed increases in the second quarter are the Panama Canal, the Colon Free Zone trade, air transport and fishing.

On the other hand, the negative trends in the second quarter were shown in construction; mining and quarries; hotels and restaurants, and agriculture.

The Panamanian government said last July that this year's growth forecast is around 4.5 percent, below 5.4 percent in 2017, while business associations have estimated GDP growth for this 2018 around 4 percent.



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Panama Shipyard Fires 40 Workers

The gate of dry dock one was damaged by causes not attributable to Mec.
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The immediate  firing of 40 employees by  the  Mec Shipyards consortium , which operates the Balboa shipyard,  on November 6, as part of a restructuring process to mitigate “significant losses” is seen as another indication of the slowing of the  Panamanian economy while President Varela and a group of businessmen are in Shanghai trying to drum up business and assessing what the effect  the trade war between the US and Canada, the Canal’s biggest users might have on the local economy.

A statement from Mec said that this is “due to the difficult economic situation faced by the Balboa shipyard and of with timely notification to the authorities, given that it is a concession contracted with the State through the Maritime Maritime Authority of Panama (AMP) “.

Mec had agreed with the AMP an addendum to the concession contract between the State and the consortium, signed in 2012 by the previous  administration, to modify two clauses that sought to reduce the duration of the contract, which was for 20 years, and the fixed fee for lease, which was agreed at $99.1 million during its term. However, the addendum was not endorsed by the Comptroller General of Panama.

In the statement, the consortium indicates that although two years ago Mec requested an economic balance that would allow it to sustain the company and preserve its workforce, “has not found an answer to overcome this difficult situation.”

The consortium based the request on the fact that, after rehabilitating the shipyard which was received in deplorable conditions and recovering the national image for the provision of its services, the shipyards sector was severely affected by the crisis in the maritime industry.



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Inflation remained unchanged in September in Panama with 0.8%

Thu, 11/08/2018 - 16:35

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Panamanian inflation remained unchanged in September with respect to the previous month and the accumulated inflation since January remained at 0.8 percent, while year on year it stood at 1.4 percent, according to data from the National Institute of Statistics and Census (Inec) released today.

The statistical entity said that the Consumer Price Index (CPI) for September did not reflect variation with respect to August, while compared to the same month of 2017 it was 0.8 percent.

The groups that showed increases in the CPI for September with respect to August 2018 were alcoholic beverages and tobacco with 0.6 percent; Miscellaneous goods and services with 0.3 percent; furniture, household items, as well as restaurants and hotels, both with 0.1 percent.

The food and non-alcoholic beverage groups; housing, water, electricity and gas; health and education remained unchanged, the Inec said, while clothing and footwear groups showed a negative -0.7 percent; communication (-0.2 percent); transportation and recreation, and culture, both with - 0.1 percent.

The statistical entity noted that when comparing the CPI of September 2018 with 2017, there were increases in education (3.7 percent); alcoholic beverages and tobacco, and restaurants and hotels, both 2.5 percent; and transportation with 1.9 percent.

There were also increases in the various goods and services groups (1.0 percent); health (0.9 percent); housing, water, electricity and gas (0.7 percent); furniture, household items (0.6 percent), and recreation and culture (0.1 percent).

The groups that showed decreases in the study period were clothing and footwear (-1.4 percent); communications (-0.8 percent), and food and non-alcoholic beverages (-0.2 percent).



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Construction permits are greater than building space in Panama

Wed, 12/05/2018 - 09:09

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The Panamanian Chamber of Construction (Capac) began a very complex 2018 in construction matters, stating that the last month will be even worse the first quarter of 2019.

This analysis is based mainly on the figures released by the Comptroller General Office, noting that until October of this 2018, there is a considerable decline of 21.8% in construction permits, additions and repairs of housing projects. This percentage is established based on the figures for 2017, showing that the country's projections for housing have declined; in fact, when comparing figures in money, in 2017 the figure was $ 167.6 million and this 2018, $ 131.1 million.

Despite higher revenues in non-residential projects (+ 9.1%), the decline in residential projects (-30.0%) is a considerable burden in the numbers of the industry, so that construction ceases to be a profitable business within the trade and Panamanian work arena.

Areas such as Colón, La Chorrera and Panama recorded increases in demands and/or projects in non-residential constructions, while in Aguadulce, Arraiján, David and Santiago demands began to decline. However, the revenues left positive numbers for the construction companies’ coffers.

Meanwhile, residential projects increased in Aguadulce, Chitré, Colón and Santiago, but the drop in areas such as Arraiján, David, La Chorrera and Panama, left red numbers in the accounts and considerable losses for the end of 2018 in Panama.

Along with this, the world of building permits suffers an oversupply of projects, with up to 441% more, which has no space to know that the increase in areas to build (per square meter) only increased by 1%. In short, the permits obtained are infinitely greater than the spaces to do so, which is a considerable obstacle.

According to information in La Estrella de Panama, a CBRE report suggests that the availability of the residential market increased from 7.1% to 8.2%, while the sale of homes (built and in process) decreased from 92.3% to 87.4%.

How is it possible for availabilities to go up, sales drop and even so, projects increase? The first factor may be the economic growth of the country, which for Héctor Ortega, president of Capac, affected a lot after not reaching the projected 5% (it will close at 3.2% -3.5%). In the same way, he urges to remember that construction has been a great contributor to Panama's GDP, so another factor could be the little recognition of this sector within the Panamanian administration.

Ortega regarded the construction business as cyclical, so those involved are optimistic within this area and have met constantly to reactivate it, emphasizing the need for planning and certain changes that must be applied within the projects that exist so far.

One of the proposals for the Government of Panama is to raise the top of the preferential interest rate for houses up to $ 150 thousand, something that with the necessary bank guarantee, will increase production and reliability in the construction sector.

With the negotiations between China and Panama on the horizon, it is not ruled out that the fourth (or hypothetical fifth) round of negotiations for the FTA includes points referring to the subject, whether in labor, technology, resources or several points, on the verge of 2019, the changes in construction within Panama can be constant and significant soon.

In fact, from now certain changes can be seen, such as the construction of the fourth bridge over the Panama Canal, just under Chinese investment that begins to arrive with the treaties that began in mid-2017 and that now begin to lay important foundations to the point of having received Xi Jinping in Panama, sealing import exchanges with national production and also with companies from this growing country hand in hand with the Asian exchange.



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Panama: Slight Increase in Unemployment Rate

Between August 2017 and the same month in 2018, the rate of open unemployment in the country rose from 4.8% to 4.9%, and Colon and West Panama were the provinces where the highest levels of unemployment were registered.

Thursday, December 6, 2018

According to the latest Labor Market Survey, compiled by the General Comptroller, the percentage of open unemployment increased from 4.8 in August 2017 to 4.9 in August this year. For women their percentage remained constant at 6.3, and for men an increase of 0.2 percentage points was observed, from 3.7 to 3.9.

The report details that of the 96,623 people who declared to be in open unemployment, the most was the young population (15 to 29 years old) with 61.9%, 35.6% were between 30 and 59 years old and a small percentage was 60 and older (2.5%).

According to the document, the largest decreases in the number of employed persons by category of economic activity were reported in Water Supply; Sewerage, Waste Management and Sanitation Activities (27.2), Electricity, Gas, Steam and Air Conditioning Supply (10.4) and Real Estate Activities (7.8). Meanwhile, percentage increases were observed in the employees in the categories: Mining and quarrying (67.4), Other service activities in the tertiary sector (20.2), Social and human health-related services (19.0) and Information and communication (17.9).

Percentage increases in the urban area were presented by area of residence of the employed population in the following economic activities: Mining and quarrying (63.2), Social and human health-related services (19.7); while activities such as water supply, sewerage, waste management and sanitation activities registered decreases of around 26.7.

See full report.



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Investment  in building permits plummets 49%

Investment in building permits in Panama in the first nine months of 2018 fell 49%  to its lowest level in six years reported Panama’s  Chamber of  Construction (CAPAC) on Tuesday, December 11. "From January to September of 2018, the investment was $758 million, while in the same period last year the amount reached $1 496.2 billion


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Panama lived a 2018 marked by an economic slowdown in the pre-election year

Wed, 12/12/2018 - 08:27

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By Giovanna Ferullo

Panama experienced a 2018 marked by an unexpected economic slowdown, registered in the middle of a confrontation between the Executive and the Legislative just one year before the general elections in the country.

Panama seemed to resume the path of growth after the rebound of gross domestic product (GDP) in 2017, when the indicator was 5.4%, but a one-month strike in the most important construction sector led to a fall of 2018 estimations from 5.6% to around 4%.

Economists agree that in addition to the strike, the strong dollar, the current currency in Panama, affected sectors such as tourism, including the chronic anemia of the production of the field and a drop in direct foreign investment (IED), which reached 13.2% in the first quarter of the year.

The economic situation had its impact on the unemployment rate, which rose to 6% last August, the most recent official data, which was an increase of 13.3% over the same month of the previous year.

The administration of Panamanian President Juan Carlos Varela, local economists and the International Monetary Fund (IMF) have predicted a much more dynamic 2019 thanks to the expected start of operations of a large copper mine with an investment of 6,300 million dollars.

The project, known as Cobre Panamá and owned by Canadian First Quantum, must start in the first months of 2019 despite a ruling by the Supreme Court against the law that guaranteed the mining concession in 1997, which does not affect it, according to the criteria of the company.

The economic improvement will also come from the start of major infrastructure works such as the fourth bridge over the Panama Canal, with an investment of 1,420 million dollars and by the consortium formed by China Communications Construction Company LTD and China Harbor Engineering Company LTD.

It is the first major public project in charge of companies in China, a country with which Panama established diplomatic relations in June 2017 precisely with the prospect of increasing exports and attracting large capital from the Asian giant.

In this context, Chinese President Xi Jinping made an historic official visit to Panama at the beginning of December, in which 19 agreements were signed, in addition to another twenty signed in the last year and while both countries negotiate a free trade agreement.

"Panama welcomes Chinese companies to finalize investment projects in Panama and establish regional headquarters (...) both parties will continue to encourage their financial institutions to establish subsidiaries in order to expand financial services networks, and will increase interbank cooperation and in terms of financial regulation," reads a joint statement signed by Varela and Xi.

China’s new status prompted a call for consultations from the United States representative in Panama, which until now seems only a tug on the ears of the main trading partner of the Central American country in all areas.

The thunderclouds in the economic sphere included the difficult relation between the Executive and the Legislative after the rupture of a so-called "governance pact", a scenario that prevented the appointment of new magistrates of the Supreme Court throughout the year, a figure that the country has been carrying since 2017.

The lack of consensus led to unprecedented situations in this constitutional period (2014-2019) as the non-legislative approval of items for various state institutions and the return, twice, of the draft budget for next year, which was finally approved.

The political situation has been linked to the fact that the different parties have been defining their offer for the general elections of May 2019 in which, according to the tradition of the young Panamanian democracy, the opposition always wins.

The pre-electoral environment has also been shaken by the case of former President Ricardo Martinelli (2009-2014), summoned for oral and public trial for alleged illegal wiretapping and fraud, a case that he claims as an invention of Varela, his great political enemy, and for which the prosecution requests a punishment of up to 21 years in prison.

Martinelli has faced up to now in preventive prison this process, since he began in the Supreme Court, that developed all the instruction phase soon to transfer it to an ordinary court.

But the confinement did not prevent the former president from obtaining a candidacy for a deputy in party primaries and also seeking to run for mayor of Panama both independently - for which his allies are collecting signatures - and for his divided Democratic Change party, which has promised that box on the ballot of May 2019.



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Recruitment Forecast Down for 2019

For the first quarter of 2019, 11% of companies in Panama expect to increase their payrolls, which is less than the 13% reported for the fourth quarter of 2018.

Friday, December 14, 2018

Panamanian employers report limited hiring expectations for the first quarter of 2019, with 11% of employers anticipating an increase in their workforces, 7% expecting a decrease and 78% remaining unchanged, resulting in a +4% Net Employment Trend, says Manpower in its quarterly report.

The document explains that employers in Panama City expect a moderate increase in their workforces for the following quarter, with a +6% Net Employment Trend. However, employers in Colon expect to reduce workforces, reporting a -5% trend. On the other hand, Central Province employers report a 0% trend, and limited hiring plans are reported in the West with a +1% trend.

For the next quarter, employers in three of the six industrial sectors expect an increase in workforces. The strongest hiring plans are reported in Services, with a +14% Net Employment Trend. On the other hand, slight increases are expected in Manufacturing and Construction hiring levels, with +4% and +2% Trends, respectively. However, employers expect to reduce workforces in three sectors, highlighting the sectors of Communications & Transport and Agriculture, Fisheries, Mining & Extraction, with -6% and -2% Trends, respectively.

See full report.



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Panamanian Economy will Rebound in 2019

This year, the economy is expected to grow 3.8% and in 2019 the increase could reach 5%, which would be determined by the activities of the Canal, transportation, mining and telecommunications.

Wednesday, December 19, 2018

The Indesa firm forecasts that next year Panama's economy will increase its dynamism compared to 2018, since the activities related to the external part will register good performance.

Felipe Chapman, a partner of the firm, said to Prensa.com that "... dynamism is concentrated in sectors that are linked to the external sector, while the activities that the citizen perceives most, such as consumption, are going to have a more moderate behavior. Private consumption will only grow 0.6% in 2018 and 1.2% in 2019, rates lower than the 4.1% recorded in 2016."

Chapman added that "... Among the factors that may have a positive impact on growth forecasts are a greater impact than expected by the World Youth Day, the greater recovery of construction activity and the increase in tourism activity because of the expansion of Tocumen and the beginning of operations of the Amador Convention Center."

According to the specialist, the risks that could push down the forecasts are "... a faster increase in interest rates by the U.S. Federal Reserve, which could slow private consumption, the trade conflict between the U.S. and China, that could affect the logistical activity of Panama and a greater dollar appreciation, which would reduce competitiveness of Panamanian exports."



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Food costs  show continuing upswing

No only food prices on the rise
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From May to October, the cost of the basic family food basket in Panama and San Miguelito maintains a constant rate of increase. The total adjustment is $ 2.81, according to the latest report from the Ministry of Economy and Finance (MEF) .

The increments per month Although they do not seem substantial increases, consumers have to allocate more of their budget to buy the same food, in addition to dealing with the rise of other items that are outside the basic list of the 59 products used by the agency reports La Prensa.



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IMF predicts Panama 6.3% growth rate

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Panama’s growth rate will rebound to above six percent in 2019 after a year in which growth was at the lowest level in a decade says the  International Monetary Fund (IMF), which recently published its conclusions on the annual review of the economy of after a visit to the country.

For 2018, the IMF calculated growth of 4.3% as a result of the slowdown in key sectors, including construction, affected by a one-month strike by workers. The lower dynamism translated into a marginal rise in unemployment to 5.8%, while inflation remained controlled despite the increase in the price of food and fuel.

In 2019 a recovery of two percentage points is expected, to reach a growth rate of 6.3%.

“A growth of 4.3% in 2018, and a rebound to 6.3% in 2019 is supported by the opening of a large mine and the recovery of construction to converge towards its potential of 5.5% in the medium term,” says the report.

The greatest dynamism would be supported by the start of operations of the Colón copper mine and the recovery of construction. With a collective agreement already agreed for the next few years, it is not expected that there will be a similar break in activity to that of 2018. This factor, together with the start of major public infrastructure works, will make a difference with respect to the previous year.

The analysis of the international organization coincides with that of local experts reports La Prensa.  The president of the National College of Economists, Olmedo Estrada, said that 2019 is presented with positive prospects. The Panama Canal, mining, international trade and logistics, and the financial center will provide the gross domestic product (GDP) with important levels of production to sustain a 5.5% growth, supported by public and private investments.

The IMF projects moderate fiscal deficits in line with the provisions of the Fiscal Social Responsibility Law, which, together with economic growth, would lead to a reduction in the ratio between debt and GDP to levels close to 33% in 2023 from 38.3% in 2018.

“2019 presents positive perspectives. The Panama Canal, mining, international trade and logistics, and the financial center will provide the GDP with important levels of production to sustain a 5.5% growth “.

The general opinion of the IMF is positive. Growth, which is among the highest in the region, is based on sound economic fundamentals. But there are perceived risks like the lack of compliance with the recommendations of the Financial Action Task Force (FATF), the oversupply in the local property market, delays in the completion of the mining project, the political uncertainty over the May elections, more restrictive global financial conditions and increasing protectionism.

The agency mentioned Panama’s progress in technical compliance with the FATF standards, but highlighted the importance of an effective implementation of the money laundering prevention framework and referred to the need to promptly address the remaining deficiencies, including cataloging tax evasion as a predicate offense of money laundering and ensure the availability of accurate and timely information on beneficiaries of entities incorporated in Panama.

Although Bill 591, which criminalizes tax evasion, was approved in the first debate by the National Assembly, the initiative is still hanging.

The  Ministry of Economy and Finance has warned that if the project does not progress, the country faces the real possibility of again being included again in the FATF gray list which identifies territories with deficiencies in the fight against money laundering.



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IMF: Panama will Grow 6% in 2019

According to the international organization, the Panamanian economy will grow 6.3% this year, boosted by the recovery of the construction sector and the start-up of operations of a large mining project.

Monday, January 7, 2019

In the words of the International Monetary Fund (IMF), the Central American country's economy is projected to remain among the most dynamic on the continent, as the outlook remains positive.

From the IMF statement:

On December 12, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with Panama.

Despite slowing in 2018, Panama is expected to remain among the most dynamic economies in the region with strong fundamentals. Growth is estimated at 3.7 percent in the first half of 2018 (compared to 5.4 percent a year ago), reflecting a sharp deceleration in key sectors including construction, which was affected by a prolonged strike in April/May. The unemployment rate increased marginally to 5.8 percent in March 2018 from a year ago, reflecting less dynamic activity. Inflation remains subdued at 0.8 percent (year on year) in September 2018, (compared to 0.5 percent in December 2017) despite supply shocks that have increased food and fuel prices. The overall deficit of the Non-Financial Public Sector (NFPS) reached 1.6 percent of GDP in the first half of 2018 (compared to deficit of 0.2 percent of GDP in the first semester of 2017), due to accelerated budget execution to support the economic weakening. The external current account deficit stood at 8.0 percent of GDP in 2017, as a significant increase in oil imports (fueled by higher international oil prices) was offset by strong service exports, driven partly by additional revenue from the expanded Panama Canal. Credit growth has decelerated as financial conditions have started to tighten.

The outlook remains positive, albeit set against heightened downside risks. Growth is projected at 4.3 percent in 2018, but to rebound to 6.3 percent in 2019 supported by the opening of a large mine (Minera Panamá) and a recovery in construction, and subsequently converge to its potential of 5½ percent over the medium term. Inflation is expected to average about 2 percent. The external current account deficit, mostly covered by FDI, is expected to reach 9 percent of GDP in 2019 and gradually decline to about 5½ percent of GDP over the medium term. Fiscal policy is expected to remain guided by the amended Fiscal Responsibility Law (FRL). The overall NFPS deficit is projected to increase to 2 percent of GDP in 2018–19 and gradually fall to 1½ percent of GDP over the medium-term, keeping public debt sustainable and below the FRL indicative of target of 40 percent of GDP. Key risks relate to setbacks in implementing the remaining Financial Action Task Force (FATF) recommendations and making continued progress on tax transparency, continued oversupply in the domestic property markets, delays in completing the large mining project (following the recent Supreme Court ruling which creates uncertainty about some elements of the contract), political uncertainty ahead of the upcoming elections; a sharper-than-expected tightening of global financial conditions, and rising trade protectionism.

Executive Directors commended Panama’s impressive growth performance and noted that macroeconomic fundamentals remain solid, with growth set for a rebound in the near term. Directors considered that, while the outlook remains positive, the balance of risks is tilted to the downside. Against this background, they called for sustained policy efforts to strengthen the AML/CFT framework and enhance tax transparency to preserve Panama’s competitive advantage as a regional financial center. They also recommended measures to enhance financial sector resilience and reforms to facilitate continued robust and inclusive growth.

Directors welcomed the recent good progress on technical compliance with FATF standards, bringing Panama on par with its peers, while underscoring the importance of effective implementation of the Anti Money Laundering/Combatting the Financing of Terrorism (AML/CFT) framework. In this context, they encouraged the authorities to continue strengthening supervisory capacity for AML/CFT oversight, including through risk–based approaches, and further addressing AML/CFT risks to which Panama is exposed. Directors emphasized the need to promptly address the remaining shortcomings in the AML/CFT framework, including making tax crimes a predicate offense to money laundering and ensuring the availability of timely and accurate beneficial ownership information of entities incorporated in Panama. In addition, the authorities should advance the implementation of tax transparency initiatives to ensure a successful Global Forum assessment against enhanced standards.

Directors were encouraged by the authorities’ continued commitment to a prudent fiscal stance and agreed on the importance of preserving the track record of fiscal discipline to keep the public debt‑to‑GDP ratio on a downward trajectory. They concurred that the revised deficit ceilings provide the budgetary space to accommodate additional capital spending, given the softening activity this year, but recommended a gradual withdrawal of the stimulus in the near term as growth gathers pace. Directors also saw scope for raising tax revenue through improvements in revenue administration to support key social expenditures. They welcomed modifications to the social fiscal responsibility law, which simplified and enhanced the transparency of the fiscal rule; and noted the approval of a law to establish a fiscal council, which further bolsters the fiscal framework.

Directors noted the stability of the financial system and the continued progress in financial sector reforms, including the alignment of prudential regulations with Basel III. They urged the authorities to strengthen risk‑based supervision and reiterated the importance of putting in place robust frameworks for crisis management and bank resolution. In addition, Directors recommended measures to further strengthen macro‑prudential policies and systemic risk oversight, including through improved inter‑agency coordination.

Directors called for a reinforcement of the structural reform agenda to sustain high potential growth, while also reducing inequality. They agreed on the need to sustain productivity growth through reforms to improve skills and education quality, attract talent, and further improve the investment climate. Strengthening social policies to continue reducing poverty, improve income distribution, and ensure inclusive growth over the medium‑term were also encouraged.



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