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Friday, May 24 2019 @ 12:56 PM UTC

Panama's economy grew 2.59 percent in February

Money MattersPANAMA CITY, April 23 (Reuters) - Panama's economy slowed dramatically in February to grow at a 2.59 percent rate from the same month a year earlier as the global economic crisis bit, the government said on Friday. Fueled by luxury apartment construction, U.S.-Asia trade through the Panama Canal and a robust banking sector, Panama's dollarized economy led Latin America with near or above double-digit growth the last two years. Analysts expect 2009 growth to fall to 3 percent or less as credit dries up, canal traffic drops and activity in Panama's large Caribbean free-trade zone slows. (more)

'Panama has enjoyed extraordinary performance during the last six years and especially in the last two years the economy has had an accelerated and maybe even overheated growth,' said Domingo Latorraca, a consultant at Deloitte and former vice minister of economy.

April government reports showed new construction starts were down, stoking fears of a spike in unemployment, which so far remains near historical lows.

A $5 billion expansion of the canal that cranks into full gear later this year, as well as plans by both leading candidates for Panama's presidency to push infrastructure and housing projects, could mitigate job losses, analysts say.

'In Panama a crisis does not exist at this moment,' said Adolfo Quintero, an economist at the University of Panama. 'One of the elements of the crisis in other countries is unemployment.'

Government spending will be scrutinized this year as revenue is expected to drop, straining public coffers that have recently been in the black.

'I believe fiscal sustainability will be put to the test the next few years,' said Latorraca. 'The fiscal health the state has had in the last three or four years is a result of an important increase in income, not of discipline in expenditures.'

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