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Panama Country Risk Report Q4 2017

Panama Country Risk Report Q4 2017

Core Views

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
fractures.
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
institutions.
Contents
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

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