IMF drops to 5.1% forecast for Panama's growth in 2017

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  • Fri, 03/17/2017 - 11:01
IMF drops to 5.1% forecast for Panama's growth in 2017 but it is optimistic
  • IMF drops to 5.1% forecast for Panama's growth in 2017 but it is optimistic
  • FILE

PANAMA CITY.- The International Monetary Fund (IMF) has lowered its forecast for growth in the Panamanian economy from 5.8 to 5.1 this year, but it remains positive and continues to see in the country "one of the most dynamic economies in the region".

An IMF mission, which ended an on-site visit, blamed the downgrade on increased international uncertainty, but it predicted a 5.5% expansion in the coming years.

The mission also considered the reputational risks of the country, which has been involved in recent international corruption scandals, and has considered as "critical" that Panama continues to advance in terms of tax transparency and financial integrity.

Expanded Panama Canal activity, new investment projects, stable and low inflation, the reduction of the current account deficit and a sustainable public debt were included as factors that complement the growth of the economy.

Until 2015, Panama lived a decade with an average growth of 8% in gross domestic product (GDP), and last year it reached 4.9%, down from the 5.2% expected by the IMF.

The end of the construction of the waterway expansion and an unfavorable international environment put an end to the accelerated growth registered in the last 10 years.

The head of the mission, Valerie Cerra, told a press conference that the country's expansion model depends on its ability to remain competitive and attractive in financial, business and transportation services.

The revelation of Panama's corruption scandals may be a disadvantage in this area, depending on how they are addressed, but information on these issues is still preliminary and no significant impact can be envisaged, she said.

The group of four economists also valued the potential risk of the protectionist measures announced by the new US Government and the consequent decrease of Asian imports in that country, which is one of the main users of the Panama Canal.

However, Cerra said "there are many possible scenarios", because the policies of President Donald Trump are in development.

Other external issues that are expected to affect Panama in the medium term are the increase in US interest rates. And the appreciation of the dollar, which would complicate competition for the Central American country as its legal tender, Cerra said.

The head of the mission highlighted, as in other years, the need to create a lender of last resort to help in the case of shock to the banking center of Panama, a country that lacks a central bank and whose government has admitted dissent this idea.

She also repeated the need for a fiscal council to evaluate and monitor the results and promote transparency, an initiative that is now in a bill handed down by the Government to the IMF for its evaluation, said at the conference the Minister of Economy and Finance, Dulcidio de la Guardia.

Cerra also considered the education system, which needs reform to increase its quality, improve teachers' skills and produce better qualified workforce to take advantage of opportunities for continued economic growth.

This and an effective social safety net are essential for more inclusive expansion, she said

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