Panama Country Risk Report Q4 2018
Panama will see strong economic growth in 2018 and 2019 as private consumption and public investment both pick up.
The fiscal deficit will modestly narrow in the coming quarters as strong economic activity and rising trade through the Panama Canal support revenue growth. Elevated public infrastructure spending, however, will prevent significant fiscal consolidation.
The May 2019 general election in Panama will be closely contested between the country's three major parties. While corruption will be be a major concern for voters, it is unlikely that the next president will alter Panama's pro-growth economic policies.
Robust services export growth will support Panama's current account balance in the coming years. Foreign investment inflows will provide adequate support to Panama's external position.
A worsening of trade relations between the US and China could severely undermine government revenues, which are supported by Panama Canal transit fees.
Lingering corruption concerns regarding the Panama Papers and Odebrecht scandals negatively affect investor sentiment towards Panama, putting the country's infrastructure programme and financial services sector at risk.
Over the long term, an increasingly close economic relationship with China could pose upside risks to our growth outlook as stronger trade relations boost export volumes and investment helps to drive expansion of the construction sector.
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