Panama's Economy Grew at 9.5% in 2007 - Leads Latin America
Friday, December 14 2007 @ 10:41 PM UTC
Contributed by: Don Winner
Editor's Comment: According to the detailed statistical analysis presented in this report (and available here) Panama's economy grew at an astounding 9.5% in 2007, the fasting growing economy in all of Latin America and the Caribbean. This is good (great) news for Panama. I expected the numbers to come in at around 10%. In this chart expressing the annual percentage growth of the Panamanian GDP, you can see how the turnaround started in 2002, strengthened in 2003, and then "boomed" in 2004 with the start of the real estate splurge. This strong pattern of grown will probably continue for the foreseeable future, especially considering the incredible amount of foreign direct investment that's pouring into the country. My prediction for 2008 - at least 11% (maybe higher) and best growth in Latam again, accompanied by a continued drop in unemployment and increasing inflation;
- 1998 - 7.3%
- 1999 - 3.9%
- 2000 - 2.7%
- 2001 - 0.6%
- 2002 - 2.2%
- 2003 - 4.2%
- 2004 - 7.5%
- 2005 - 7.2%
- 2006 - 8.7%
- 2007 - 9.5%
According to ECLAC, many of the trends characterizing the region's current stage of economic growth stayed on course during 2007, including its current account surplus (albeit at a lower level), renewed improvements in terms of trade (also at a lower rate), sustained positive primary results for fiscal accounts, decreased unemployment; increased international reserves and reduced external debt as a percentage of GDP. Meanwhile, dynamism in investment continued and private consumption grew considerably.
Current accounts registered a surplus of 0.7%, with terms of trade increasing by 2.6% overall, despite notable differences among countries. Gross disposable national income grew by 6.5%, exceeding GDP growth rate, while domestic demand increased by 7.7%.
The region's net external liabilities continued to drop over 2007. Most countries reported inflows of private capital, which upped the pressure on exchange rates and produced a significant accumulation of international reserves, which are estimated to exceed 3.5% of regional GDP. At the same time, the foreign debt burden dropped considerably.
Taken as a whole, these factors place Latin America and the Caribbean in a much stronger position to face increased external volatility.
Another positive development is the lowering of the unemployment rate to 8.0%, its lowest level since the early 1990s. Moreover, this decrease occurs in a context of relative improvements in the quality of employment, which, coupled with economic growth, has a positive impact on poverty indicators.
Forecasts and Challenges
The United States mortgage loan crisis has generated a sense of increased risk of economic slowdown. While the magnitude of the US crisis is not yet clear, the performance of other national economies constitutes a matter of concern. The most likely scenario for a US economic downturn is of 2.2% in 2007 to 2.0% in 2008. Growth in the European Union could drop from 2.9% in 2007 to 2.5% in 2008, and Japan could follow suit, with a projected decrease of 2.0% to 1.7% in 2008.
In summary, the lesser pace of developed country growth makes moderate world economic slowdown possible, with limited but divergent impacts on emerging economies. For Latin America and the Caribbean, the ECLAC Preliminary Overview 2007 forecasts that the relative strength of the region's economies warrants cautious optimism.
But the current situation is not free of risks. In addition to the likely slowdown of the US economy, Latin America exhibits warning signs of its own, including persistent decreases in the real exchange rate, growing inflation in several countries, and an overall increase in public expenditure.
In addition to these short-term risks, ECLAC cautions that the region is not doing enough to improve competitiveness at the systemic level, and cites the specific need to increase investment (especially infrastructure for energy and transport), encourage innovation and foster greater human resource capabilities, primarily by improving the quality of education.