Fitch Ratings: Negative Outlook for Panama

Arguing that the pandemic has had a negative effect on the local economy and Panamanian public finances, Fitch Ratings downgraded the country's sovereign rating from BBB to BBB-.

Thursday, February 4, 2021

Regarding forecasts for 2021, the rating agency expects Panama to experience an economic recovery with a real growth of 9.2%, driven by the economic opening, public investment projects such as the construction of Metro Line 3, exports from the copper mine, and the recovery of domestic consumption. This growth trend is expected to be maintained by 2022, informed the Ministry of Economy and Finance of Panama (MEF).

The statement dated February 4, 2021 states that "... this rating, although it affects us, does not alter the investment grade that we maintain. Fitch indicates that Panama's investment grade is supported by its high per capita income, product of a history of solid and stable macroeconomic performance that exploits a strategic location and asset (the Panama Canal)."

For Hector Alexander, Minister of Economy and Finance, "it is necessary to highlight that in 2019 the country was going through a difficult situation of public finances and economic activity, in addition to the above, the COVID-19 crisis was added."

The official continued that "... there is no doubt that we are facing a huge challenge as a country and the government is analyzing a series of initiatives regarding the issue of income and expenditure, and the cost-benefit ratio of them. The National Government obtained additional resources to those originally budgeted in the financial markets to address the crisis caused by the pandemic, however, we are aware that new measures will be required to continue addressing the health situation, support for those most affected and those measures that boost economic activity."

Check out the "System for monitoring markets and the economic situation in Central American countries", prepared by CentralAmericaData.

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