IMF predicts Panama 6.3% growth rate

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 “.

Risks
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.