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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.



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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.



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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.


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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



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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.


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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


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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).



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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).



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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).



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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.



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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).



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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).



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