A dynamic services sector, a strong investment climate and the Panama Canal
expansion programme are expected to ensure that economic growth in Panama exceeds
last year's 8.1%.
This is the conclusion of Moody's, the international ratings agency, which
stated that the country's Ba1 foreign currency government bond rating and stable
outlook are supported by "a dynamic service sector that has served to shield
the economy from the volatility observed in other countries in the region, and
by a favourable debt profile".
"The strong performance of services' exports (including tourism), domestic
consumption and investment activity, in preparation of the Panama Canal expansion,
are key contributors to such growth," noted Moody's analyst senior Alessandra
Alecci, according to an AFX News report.
Driven by revenues resulting from the 2005 tax reform, Moody's observed that
the non-financial public sector deficit has moved into surplus for the first
time in a decade.
However, Alecci reportedly cautioned that Panama would not be immune from the dangers
of a global economic downturn, given the Central American economy's sensitivity
to the external environment. This, she suggested, would "pose significant challenges
to Panama's performance".
In June, Moody's upgraded Panama's foreign and local-currency country ceilings
for bonds to A3 from Baa1, reflecting a decline in risk during a period
of relative macroeconomic and political stability, the responsible running of
the Panama Canal since the handover from the US in 1999, and the relative
smooth running of government affairs despite periods of alternating power between
the two main political parties.
Last year, Panama's construction sector grew by 17.4%, reflecting a continuing
property boom, which also perhaps assisted growth of 12.8% in the banking sector.
Improving tourism lifted the hotel and restaurant sector by 12.5%. External
trade grew by 11.3%.
Panama's finances will be dominated for years to come by the proposed expansion
of the canal, anticipated to cost US$5.25 billion, with construction expected to
be completed in 2014.
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