Panama facing major recession after 31 years of growth

With  the health crisis lasting longer than expected the  Economic Commission for Latin America and the Caribbean (Eclac),  predicts that the Panama economy will register a contraction of 6.5% this year, four and a half points, more than expected in April ending 31 years of growth.

 Manuel Ferreira, director of the Center for Economic Studies of the Chamber of Commerce, Industries, and Agriculture, said last June that the annual contraction of the economy could reach levels between 7% and 10%.

Former Vice Minister of Economy, Domingo Latorraca, estimated this week that the drop could be 4.5%, while economist Felipe Chapman recently projected a contraction of 4%, although he anticipated that it could be revised downwards again.

The magnitude of the contraction will ultimately depend on how long the confinement and the stoppage of activities are prolonged, in addition to the effectiveness of the measures to promote economic recovery.

What seems inevitable is that the country will experience the first recession after 31 consecutive years of growth.

Projections for the entire continent and for other regions of the world are more discouraging.

Latin America and the Caribbean as a whole will decrease 9.1%, with marked contractions in large economies, such as Argentina (10.5%), Brazil (9.2%) and Mexico (9%). Even deeper will be the recessions in Peru (13%) and Venezuela (26%).

ECLAC notes in its report that, for the first time in decades, the Chinese authorities have not set an annual growth target, and the expansion of the economy is expected to be 1%, the lowest rate in more than 40 years. For the United States, the Federal Reserve projects a fall of 6.5%, while the European Central Bank forecasts an 8.7% reduction in GDP in the euro area.

The fall in all regions will imply a substantial loss of employment. For Panama, the unemployment rate is estimated to climb from 7% to a rate of between 15% and 20%, according to central government estimates leaving some 400,000 jobless.