In one of the regions that receives the least amount of taxes in the world, the tax burden remained relatively stable in 2017.
From the section Fiscal Outlook for Central America, from the report "Macro-fiscal Profiles: 9th edition", by the Central American Institute of Fiscal Studies (Icefi):
In 2017, the fiscal trajectory of countries in the region remained relatively constant with respect to what was observed in 2016.The following are highlighted as policy orientations: a) lack of political agreements, which transformed into a real impossibility of increasing tax revenues through tax reforms or strengthening the administrative capacity of tax administrations, and b) implementation of austerity programs, which in several countries had a greater impact on capital expenditures, in order to avoid an increase in the fiscal deficit and public sector debt.
The rating agency has raised the outlook from stable to positive and reaffirmed the Baa2 investment grade rating, arguing that economic growth will continue to rise and will remain above the level of its peers.
From a statement issued by Moody´s:
New York, September 29, 2017 -- Moody's Investors Service has today affirmed the Government of Panama's issuer rating and senior unsecured bonds at Baa2 and senior unsecured shelf at (P)Baa2.
The non financial public sector deficit was $911 million, equivalent to 1.7% of GDP, improving the position by $103 million compared to 2015.
From a statement issued by the Ministry of Economy and Finance:
The Minister of Economy and Finance (MEF), Dulcidio De La Guardia, presented today at a press conference the results of the Central Government and Non-Financial Public Sector (NFPS) Fiscal Balance for the third quarter of 2016.
The agency highlights the country's macroeconomic stability, while noting a slight deterioration of fiscal indicators in recent years.
From a press release issued by Moody's:
New York, October 25, 2016 -- Panama's Baa2 rating with a stable outlook reflects the country's strong economy and its broad macroeconomic stability, says Moody's Investors Service.
The countries facing the greatest risk of fiscal unsustainability within three years are El Salvador and Honduras, followed by Costa Rica and with less risk, Nicaragua and Panama.
From the "EconomicOutlook"section of the V Report on the State of the Region 2016:
Due to a 12% increase in revenue in the first half of 2016 the fiscal deficit of the nonfinancial public sector fell by 80% compared to the same period in 2015.
From a statement issued by the Ministry of Economy and Finance:
The Minister of Economy and Finance, Dulcidio De La Guardia, presented today at a press conference the results of the Fiscal Balance of the Nonfinancial Public Sector (NFPS) and the Central Government, for the first half of 2016, highlighting a significant reduction in the deficit, which went from 647 million dollars in the first six months of 2015 to 129 million in the same period this year, representing a reduction of 519 million or 80.2%.
From 2014 to 2015 the size of central governments remained constant at an average 18.5% of gross domestic product (GDP).
From the introduction of the report: "Macrofiscal Profiles: 6th Edition" by the Central American Institute for Fiscal Studies (Icefi):
2015 proved to be a period of low tax advance for the Central American region. On average, the size of central governments remained constant compared to 2014, at 18.5% of gross domestic product (GDP). However, not all nations maintained this trend in the same way. While the governments of Nicaragua, Costa Rica and El Salvador, some of the largest fiscally in the region, continued to increase their participation in the economy, reporting increases of 1.5, 0.7 and 0.7% of GDP, respectively, the Government of Guatemala - one of the smallest in the world became even smaller, being reduced by 1.2% of GDP. For its part, the Government of Honduras reported a small decrease of 0.2% of GDP, fully converged with its policy of fiscal austerity, while that of Panama had a transient contraction of 1.4%, reflecting a reorganization established by the new administration and that, according to the plans for 2016, will be reversed in full.
As in old fashioned patriarchal homes, if there must be suffering, the first to suffer are the stepchildren, and only afterwards, if necessary, the legitimate children.
EDITORIAL
The announcement by the Solis administration that it has a plan B in case it does not manage to get legislative approval for the proposed tax increases designed to address the serious and growing fiscal deficit, highlights the existence in Costa Rica of first class citizens and second class citizens.
"Fiscal accounts for 2015 anticipate an additional burden of concerns about the sustainability of the public finances of the governments of the region."
From a report entitled "Macrofiscal Profiles: 3rd Edition" by the Central American Institute for Fiscal Studies (Icefi):
The close of fiscal year 2014 has left more uncertainties than certainties in the current panorama for Central America.
Slow recovery tied to a lagging U.S. economy, 3% growth in 2010 due to increased domestic consumption and rising remittances and international trade.
The countries in Central America are recovering gradually, led by a rebound indomestic demand (following its sharpcontraction in 2009), which has partly spilled over into imports. Pickups in exports and morerecently remittances have been further positive developments.
Central American countries still need to improve their economic performance to reach investment grade ratings.
On its Quarterly Country Risk report for June 2010, the Central American Monetary Council (SECMCA), notes that Moody’s Investor Service improved the foreign currency risk ratings for Guatemala and Nicaragua. For Guatemala, the criteria for this improvement included a stable macroeconomic environment, backed by prudent fiscal and monetary policies, and for Nicaragua improvement in debt indicators and low fiscal deficits.
In El Salvador, the debate over the advantages and disadvantages of dollarization has been reignited, as the government is in need of resources for funding its programs.
President Funes has regretted that Dollarization has limited El Salvador from taking actions to combat the economic crisis. However, Augusto De la Torre, chief economist for Latin America and the Caribbean at the World Bank, repeated that dollarization is not an obstacle, and that in the case of Panama and El Salvador it has been key to relieve them from external pressures and exchange rate volatility.
In the wake of Panama’s upgrade to investment grade, experts are already calling to maintain the efforts that led to such achievement.
Fitch’s recent upgrade of Panama’s debt to BBB- is likely to be mirrored by other big rating companies, confirming Panama’s entrance into the club of investment-grade countries.
The country is now fertile land for investments, lead by the widening of the Panama Canal, and now the investment grade will help lower the cost of credit for many projects, specially infrastructure.
Fitch Ratings warned that although Central American sovereigns have resisted the global crisis pretty well so far, they now require fiscal consolidation in order to maintain their credit ratings.
Summary
Fitch‐rated Central American sovereigns have thus far withstood the destabilizing effects of the global economic and financial crisis, despite monetary and exchange rate policy challenges.
Fitch expects that Latin America’s real GDP will contract by 0.9% in 2009, with Brazil’s economy stagnating at best and Mexico contracting by over 2%.
Latin American economies have recoupled with the crisis in the developed economies. Since September 2008, Latin American countries have been buffeted by stronger external headwinds, as evident from the fall in regional currencies and stock markets and from widening bond spreads.