Экономические исследования
Panama

Panama

Population 4,006 million
GDP 13012 US$
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Synthesis

MAJOR MACRO ECONOMIC INDICATORS

  2014 2015 (f)  2016 (f) 2017 (f)
GDP growth (%) 6.1 5.8 6.1 6.4
Inflation (yearly average) (%) 2.6 0.1 0.8 2.0
Budget balance (% GDP)* -3.2 -2.8 -3.1 -2.1
Current account balance (% GDP) -9.8 -6.5 -6.2 -5.0
Public debt (% GDP) 37.1 38.8 39.4 38.4

 

(e) Estimate (f) forecast

* excluding Panama Canal Authority

STRENGTHS

  • Interoceanic canal
  • Fully dollarized economy and financial stability
  • Colón Free Trade Zone, world’s #2 import-export platform
  • Regional banking and financial centre

WEAKNESSES

  • High exposure to north and south American economies
  • Infrastructure shortfalls (transport, energy, education, healthcare)
  • Wide disparity between the Canal zone and the rest of the country
  • Corruption and nepotism

RISK ASSESSMENT

Infrastructure investments act as main driving force for growth

The Panamanian economy is the most dynamic in Latin America. Its major infrastructure projects (2nd subway line under construction in Panama City, urban renewal in Colón and a 4th bridge over the canal) and increasing revenues from the enlargement of the Panama canal (officially opened in June 2016) should contribute to a slight boost to growth in 2017. The enlargement of the canal should in fact enable a 28.3% increase in exports of goods compared with 2016. This expansion should help transform the country into a maritime crossroads between North America and Asia. The logistic hub will thus enable the country’s coastal areas to develop their financial services, logistics and tourist sectors (19% of GDP in 2016). In addition, private investment will hold steady in 2017 at +4.9%. The attractiveness of the country does not seem to have suffered in the Panama Papers scandal, given the large number of multinationals that have set up in the country, the improving business climate (the “Doing Business” survey placed the country in 67th place in 2017 against 70th in 2016) and FDI which is holding steady. The Panamanian banking system, acting as the effective financial sector for the region, should prove resilient, demonstrating its self-financing capacity .
Household consumption remains strong in a context of the full employment generated through these investments. Credit in the private sector is expected to increase by 7.1% in 2017 (compared with 2.1% in 2016). It will however be limited by inflation which is expected to increase with the gradual rise in oil prices.

 

The budget and current account deficits are shrinking, thanks mainly to canal activity and inward foreign investments

The budget deficit should fall in 2017. Revenues are expected to rise faster than expenditure thanks to earnings generated as a result of the enlargement of the canal (between 1 and 1.6 billion dollars according to government estimates). The 2017 budget, approved at the end of August 2016, includes a 7.6% increase over 2016, mainly for increased infrastructure spending. The level of the public debt will thus remain relatively stable in 2017.
The current account balance is likely to remain in deficit in 2017. Exports will rise with the increase in exports of goods made possible by the enlargement of the canal, at the same time as the growth in imports should slow. The foreign trade balance will remain in deficit because imports are structurally greater than exports. The expansion of the services sector will accelerate thanks to the canal. There should also be a further improvement with the upcoming opening of the Cobre Panama mine. The income balance will remain negative because of interest payments on debts held by foreign lenders and the outflow of dividends taken by foreign companies. Private medium to long-term investments however and, as of this year, short-term investments from abroad will once again provide the finance for the country.

 

A fragile parliamentary majority contrasting with a strengthening external position

With just 12 of the 71 seats in the unicameral parliament, the President, Juan Carlos Varela, of the centre-right Partido Panameñista (PP), in power since 1 July 2014, was obliged to reach a governability pact with the 26 elected members of the centre-left opposition Partido Revolucionario Democrático (PRD) party, ensuring a parliamentary majority with 49 seats out of 71. The next parliamentary and presidential elections will be in May 2019. The sitting President will not be eligible to stand again.
The Panama Papers scandal triggered a range of international reactions concerning the Panamanian fiscal system. In response, Panama demonstrated its desire for transparency with a senior OECD official who said that the irregularities and opacity that characterised the Panamanian tax system were things of the past, and that the review of progress (scheduled for June 2017) made by the country in improving the system, should be positive. Externally, the election of Donald Trump is not expected to have any significant implications for the country. Panama maintains close relations with the Pacific Alliance (Colombia, Chile, Mexico and Peru) with membership in mind, which would give it easier access to the Asian markets.

 

Last update: January 2017

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