Panama's debt ratings and outlook supported by dynamic service sector - Moody's

MUMBAI (Thomson Financial) - Moody's Investors Service said Panama's 'BA1' foreign-currency government bond rating and stable outlook are supported by a dynamic service sector that has served to shield the economy from the volatility observed in other countries in the region, and by a favourable debt profile. 'The strong performance of services exports, including tourism, domestic consumption, and investment activity in preparation for the Panama Canal expansion, are key contributors to such growth,' Moody's vice president and senior analyst Alessandra Alecci said. She added: 'Given the economy's sensitivity to the external environment, a severe downturn in global conditions would pose significant challenges to Panama's performance.' In its annual report on Panama, Moody's said that, with economic activity booming, Panama's extremely favourable macroeconomic performance is likely to extend over the medium term. Real GDP growth, which was at 8.1 pct in 2006, is likely to exceed this level in 2007. Moody's 'A3' foreign-currency country bond ceiling assesses the risk of disruption to the smooth functioning of the dollar payments system. 'Given dollarisation's long tradition in Panama, Moody's sees limited risk of such disruption,' Alecci said. 'In addition, because of dollarisation, the foreign-currency country bond ceiling reflects the lack of transfer risk.' TFN.newsdesk@thomson.com vsr/lce