Panama in 2013 will be one of the fastest growing economies in Latin America and the world, according to projections by multiple agencies.
The forecasts come from the likes of the International Monetary Fund, The Economic Commission for Latin America and the Caribbean (ECLAC) and major credit ratings agencies says La Prensa.
Gross domestic product will continue to rise after 2012 during which growth amounted to 11%.
According to ECLAC, in 2013 only Paraguay will grow at a faster pace than Panama and that is because the South American country will be recovering from a severe economic downturn in 2012.
According to The Global Competitiveness Index of the World Economic Forum, the quality of the Panamanian port system stands fourth in the world and its airport infrastructure sixth.
Panama’s government forecasts growth of 8.5% for 2013, and other groups place it at between 7.5% and 8.5%.
One of the drivers of growth is public investment. Large projects such as the construction of the Metro and the expansion of the Panama Canal will reach a peak, with completions set for 2014 and 2015.
Building permits for projects worth $1.2 billion were approved of through November, 34.7% more than the previous year and it is predicted that they will be growing by about 30% in 2012.
The most important sector of the economy, which combines the activities of transport, telecommunications and storage, will also close 2012 with growth.
Until September, according to the latest official data, this sector grew 11.9%. Logistics systems and telecommunications represent a competitive advantage for the country.
The penetration of mobile phones in Panama puts the country in second place among the 144 economies analysed Macroeconomic stability and remarkable economic growth in recent years helped Panama to climb another step in its risk rating.
In 2012, Standard & Poor’s and Moody’s raised the rating of Panama. Now, the three major rating agencies in the U.S. have the country with “BBB” or equivalent and stable outlook. This is the second level in the so-called investment grade.
Creating Savings Fund of Panama, also approved in 2012, raises the potential rating of the country in the medium term to the “A” dimension that only Chile has achieved in the region.
Agencies applauded the approval of Free Trade Agreements, but failed the new change to the Fiscal Responsibility Act and deficit limits for 2012 and onwards.
Moody’s in its latest report speaks of a “deterioration in fiscal performance” and although the government has ensured that “deficits have been consistently below the roofs”, this has been because they have been “raised repeatedly “.
For 2013, the amendment to the law raised deficit limit of 1.5% to 2.8%., precisely the fiscal deficit the government is planning for next year, which has earned criticism from business associations.
The Minister of Economy and Finance, Frank De Lima, said the intention of the Executive is to respect the law and that when it comes to public he argued that the administration has raised public investment “to Asian levels”.
In a pre-election year with a government losing popularity while seeking reelection “All indications are that it will increase the tax burden and hence the deficit,” predicts Philip Chapman, managing partner of the consulting firm Indesa.
The economist highlights the pressure on public finances, inadequate qualified human resources, energy capacity, “and that we fail to recover at least part of the institutional lost” as potential threats to Panama in economic matters.
Both Finance Minister Frank De Lima and Chapman agreed that external factors could impact on Panama. These come mainly from the United States, with a slow economic recovery and weak growth prospects in the medium term; Europe, with some countries mired in a financial crisis and government accounts, and China, the largest buyer of raw materials from Latin America and one of the main users of the Panama Canal, which will see its economy slow
Inflation, will reduce the purchasing power of citizens, a situation that could be compounded, according to Chapman, by any excessive increase of the cost of petroleum products and imported foods and inputs for agricultural production.