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Saturday, May 25 2019 @ 03:52 AM UTC

Panama Economy Holding Up

Money MattersBY JOACHIM BAMRUD for the Latin Business Chronicle - Panama will be one of the fastest-growing economies in Latin America this year thanks in large part to the $5.2 billion expansion of the Panama Canal, the solid fundamentals of its large international banking sector and its dollarized economy, experts say. "Panama will do well because of the large investment projects that are under way, including a massive expansion of the Panama Canal," says Standard & Poor's credit analyst Joydeep Mukherji. "The Canal expansion, along with other investment projects planned by the government in other types of infrastructure, should sustain growth." That prognosis is impressive in light of the fact that Panama is the country in Latin America that depends most on global trade, which is expected to see steep falls this year. Panama has the highest ratio of trade to GDP in Latin America, according to a Latin Business Chronicle analysis. In 2007, for example, exports represented 68.3 percent of GDP, while imports were the equivalent of 71.1 percent, according to our analysis of data from The World Bank and the International Monetary Fund. "Trade will subtract from growth this year," Mukherji says. (more)

SAVINGS AND INVESTMENT: Although the collapse in external demand will dampen Panama’s growth prospects, higher savings and investment relative to peers should support the maintenance of a positive growth trajectory, Fitch Ratings analyst Theresa A. Paiz-Fredel said in a recent research report.

“Panama’s resilience to the global financial crisis thus far has been better than regional peers, even with its large current account deficit and comparatively higher external financing requirement,” she argues. “This in part reflects the strength of the Panamanian banking system relative to similarly rated peers as well as the institutionalization of the country’s exchange rate regime.”

Even Panama’s blue chip companies like Copa Airlines are expected to do well this year despite what appears to be a grim outlook for travel and tourism worldwide. Citibank expects Copa to boost its net income this year despite a 6.3 percent fall in revenues, according to a Latin Business Chronicle report.

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