Panama Country Risk Report Q4 2017
Gradually rising global trade volumes will drive Panama Canal usageand a strong infrastructure pipeline will attract investment, supportingrobust economic growth in Panama over the coming years.
The finance and logistics sectors will drive services export growthand narrow the country's current account deficit in 2017, beforerising goods imports offset the gains in subsequent years.
Government emphasis on infrastructure and public works projectswill keep expenditures elevated, while the bulk of revenue gainsfrom previous tax reforms fade, causing the fiscal deficit to widenin 2018 before narrowing due to increased receipts from the expandedcanal.
Corruption allegations surrounding Panamanian President JuanCarlos Varela are likely to weaken the ruling coalition over the comingmonths, with splits in the legislature hampering policymaking.
Major Forecast Changes
Persistently weak global trade volume growth is likely to temperPanama Canal activity, and create a considerable headwind togrowth. As a result, we have downwardly revised our 2017 real GDPforecast to 5.6% from 5.8%.
- Executive Summary
- Core Views
- Major Forecast Changes
- Key Risks
- Chapter 1: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Index
- Economic Growth Outlook
- Strong Canal Usage Will Propel Growth
- The Panamanian economy will continue to surge o ver the coming months, primarily driven by robust canal activity. However, a lack of
- economic diversity means the country is likely to remain vulnerable to downturns in global trade.
- GDP By Expenditure Outlook
- TABLE: GDP GROWTH FORECASTS
- TABLE: NET EXPORTS FORECASTS
- Outlook On External Position
- TABLE: CURRENT ACCOUNT BALANCE FORECASTS
- Fiscal Policy And Public Debt Outlook
- Elevated Spending To Be Supported By Canal
- Panama's emphasis on capital expenditure on infrastructure and public services as a means to drive growth will cause its fiscal deficit to
- widen modestly in 2018. However, a new canal toll structure capitalising on surging usage will keep the fiscal account manageable over
- the coming years.
- Structural Fiscal Position
- TABLE: FISCAL AND PUBLIC DEBT FORECASTS
- Chapter 2: 10-Year Forecast
- The Panamanian Economy To 2026
- Transport-Related Services Will Sustain Growth
- Economic growth in Panama will continue to outpace the wider Latin American region over the coming decade. The country will benefi t
- from its position as a logistics and financial services hub amid a modest acceleration of global trade and shipping activity.
- TABLE: LONG-TERM MACROECONOMIC FORECASTS
- Chapter 3: Political Outlook
- SWOT Analysis
- BMI Political Risk Index
- Domestic Politics
- Corruption Scandals To Limit Policy Formation, Test Institutions
- Corrup tion investigations into a number of business leaders and high-ranking government officials in Panama, including President
- Varela, will elevate political risk. Policy formation will be limited as Varela's popularity wanes and his El Pueblo Primero coalition
- TABLE: POLITICAL OVERVIEW
- Long-Term Political Outlook
- Continuity A Strength But Public Trust To Be Tested
- Panama is characterised by broad economic policy continuity, which favours foreign investment and capital expenditure. However,
- public perceptions of political and business leaders operating with impunity in the face of corruption allegations as well as the
- government's shortcomings in addressing urban crime and income inequality will erode the public's trust in the country's democratic
- Chapter 4: BMI Global Macro Outlook
- As Good As It Gets?
- TABLE: GLOBAL MACROECONOMIC FORECASTS
- TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
- TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
- TABLE: PANAMA – MACROECONOMIC DATA & FORECASTS