Because the economy is on the road to rebound after a temporary slowdown, the entity forecasts that in 2019 will register a 6% increase and not 6.3%, as initially planned.
Thursday, February 14, 2019
Panama's economic fundamentals remain strong. The economy is on the road to rebounding from the temporary slowdown and will be gradually converging to its potential growth of 5.5% in the medium term, explains the IMF after its last visit to the country.
February 14, 2019. A staff team of the International Monetary Fund (IMF), led by Alejandro Santos, visited Panama during February 6–13, 2019. At the conclusion of the visit, Mr. Santos issued the following statement:
“Panama remains one of the most dynamic growing countries in Latin America, but economic activity has been less dynamic than expected, with growth estimated at 3.6 percent in the first nine months of 2018 (compared to 5.6 percent in the same period of 2017), reflecting broad slowdown in key sectors, including construction, which was partly affected by the strike in April–May. While there are clear signs of an economic recovery, the prolonged cyclical weakness has led us to revise down our growth estimate for 2018 to 3.9 percent (from 4.3 percent estimated in our recent report) and to 6.0 percent for 2019 (from 6.3 percent). The authorities estimate the overall fiscal deficit of the non-financial public sector at 2 percent of GDP for 2018 (from a revised deficit of 1.9 percent in 2017), which is in line with the modified fiscal responsibility law. Progress on financial integrity continues, including the recent approval of the legislation to criminalize tax evasion and the introduction of a procedural tax code among other legislative amendments.
“Panama’s fundamentals remain solid, with the economy on track to recover from the temporary slowdown and subsequently converging to its potential growth of 5½ percent over the medium term, and no overheating pressures in the horizon as inflation is projected to remain contained at about 2 percent, while credit is expected to grow in line with income. The external position is expected to strengthen significantly as the large copper mine starts production this year, and oil prices stay low, while remaining well financed by FDI. The balance of risks to the outlook is tilted to the downside, mostly related to fears of rising trade protectionism, potentially weaker global outlook, and continued oversupply in some segments of the domestic property market.
“We reiterated the need to sustain fiscal discipline and to improve the fiscal position as the economy recovers in the years ahead, aided by the stronger fiscal framework, to keep the public debt to GDP ratio on a downward trajectory. We encouraged the authorities to rely less on turnkey projects and to continue improving their statistical framework by bringing it closer to best practices. We also recommended the authorities to further raise revenue including through improvements in revenue administration and to rein in current spending to support growth-enhancing investments.
“While the banking system remains well capitalized and liquid with low non-performing loans, the authorities should continue to advance their efforts towards strengthening banking regulation and supervision (including FinTech). It will also be important to reinforce the structural reform agenda to maintain strong inclusive and sustainable growth, including by strengthening policies related to education, social security and public health services. Finally, sustained efforts to enhance AML/CFT and tax transparency are of paramount importance to strengthen Panama’s position as a regional financial center.”
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For the international organization, after the economic slowdown in 2018-2019, the economy is expected to recover in 2020 and will continue to be among the most dynamic in Latin America.
In the medium term, growth is expected to stabilize at its potential annual rate of 5% and inflation is also expected to rise to 1% in 2020, reported the International Monetary Fund after its last visit to the country.
According to the IMF, Honduras has experienced a moderation in economic growth in recent quarters, but a recovery is expected next year.
Honduras has made significant progress in implementing its economic program, which aims to foster inclusive growth through prudent macroeconomic policies and structural and governance reforms, according to the international organization's report.
Because of the weakening of the construction and services sectors, the IMF reduced the economic growth projection for Panama from 6% to 5% this year, forecasting a "slow recovery.
The fundamental aspects of the Panamanian economy remain solid, and is expected to recover and next year reach its potential growth of 5.25%, with inflation approaching 2% in the medium term, explained the international agency.
According to the international organization the outlook is favorable and the risks to the economy are moderate, and production growth for 2019 is expected to range between 5.25% and 5%.
Economic growth rebounded to a record high of 7% in 2018, with positive momentum maintained in the early part of 2019, the International Monetary Fund reported after concluding its last visit to the Caribbean country.
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