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IMF: Panamanian economy slows down and will grow 3.7% in first half of 2018

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  • Thu, 10/04/2018 - 16:55
Panamá
  • EFE

Panama's economy has temporarily slowed due to a marked slowdown in key sectors, including construction after a one-month strike, and it is estimated that it will grow 3.7 percent in the first semester of this year, said today the International Monetary Fund (IMF).

A mission of the organization submitted on Wednesday in the Panamanian capital, at the end of a visit that began on September 24, a preliminary report highlighting that "despite the temporary slowdown in 2018, the economy is aimed at a rebound in the short term and will continue to be among the most dynamic economies in Latin America".

According to the IMF's diagnosis, Panama is expected to grow by 3.7 percent in the first half of this year, which "compared to 5.4 percent in 2017, reflects a marked slowdown in key sectors, including construction, which was affected by a lengthy strike in April and May".

May 18 marked the end of a strike for wage claims in the construction sector of Panama - which in 2016 accounted for 14.9 percent of gross domestic product (GDP) - which lasted a month and generated losses between 100 and 300 million dollars, according to business and government sources.

The multilateral organization said Wednesday in its report that the unemployment rate "increased marginally to 5.8 percent as of March 2018, compared to the previous year, which reflects a less dynamic activity."

Inflation "remains low and stable, around 1 percent as of August 2018, compared to 0.5 percent in December 2017, despite the shocks in supplies that have caused increases in food prices and fuel," said the report, released on Twitter by Economy and Finance Minister Eyda Varela.

The IMF said that the general deficit of the non-financial public sector (NFPS) reached 1.6 percent of gross domestic product (GDP) in the first half of this year, compared to 0.2 percent in the first half of 2017.

This increase is the product of "lower than expected collections and a strong increase in current and capital spending made in order to provide support during the economic weakening," the document said, among other points.

"Despite the temporary slowdown in 2018, the economy is headed for a rebound in the short term and will continue to be among the most dynamic economies in Latin America.The outlook is positive in the face of a scenario of higher downside risks," reads the IMF document.

It adds that "it will be important to strengthen the anti-money laundering and combating the financing of terrorism control, as well as to improve tax transparency and the exchange of information to lay the foundations of Panama as a regional financial center."

"It will also be important to preserve fiscal discipline as the main instrument of macroeconomic stabilization, as well as to strengthen the fiscal framework through the establishment of a fiscal council," said the financial organization in its preliminary report.

It adds that "given the importance of the financial system in the Panamanian economy, the authorities should continue to strengthen the systemic risk assessment, risk-based supervision, and implement robust macroprudential policy frameworks and crisis management."

In a statement, the Ministry of Economy and Finance said that "the government's actions will continue to be aimed at promoting transparency in the institutions, within a responsible fiscal framework that allows generating the economic boost required by the productive sectors."

"Despite the regional slowdown, Panama remains one of the most dynamic economies, with responsible debt and practically the lowest fiscal deficit in the region," it added.

Already last June, the IMF said it would reduce the growth forecast of 5.6 percent for Panama this year by around one percentage point due to the impact of the construction strike and the weakening of economic activity in the first quarter.

The government said last July that this year's growth forecast is 4.5 percent, below 5.4 percent in 2017. 

 

Source: EFE

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