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panama economy Insight

Panama's economy will grow 9.2% in 2011 and double-digit in the next years

January 15, 2011

Before U.S. financial crisis, Panama's economy was growing at double-digit rates. Global downturn affected adversely this growth, reducing it to only 3.1% in 2009. By 2010, forecasts from international agencies such as the International Monetary Fund (IMF), World Bank and the Economic Commission for Latin America and the Caribbean (ECLAC), did not exceed 5%, however, Panama economy grew over 7%.

Panama Economy Insight forecasts that Panama's economy will grow 9.2% in 2011. In subsequent years, the economy will return to the levels that existed before the world economic crisis, growing 13% and 11% in 2012 and 2013 respectively.

 

FORECAST - KEY ECONOMIC INDICATORS OF PANAMA
INDICATOR 2009 2010 2011 2012 2013 2014
Economic growth rate (%) 3.1 7.1 9.2 13.0 11.0 4.9
Inflation rate (%) 2.4 3.5 3.8 4.5 3.8 3.8
Unemployment rate (%) 6.6 6.5 5.5 4.6 4.2 3.7
Interest rate (%) 7.9 8.0 8.6 7.8 8.2 9.4
Fiscal deficit or surplus (as % of GDP) -1.0 -1.2 -0.7 0.0 -0.4 -1.6
Public debt (as % of GDP) 46.3 43.6 39.7 34.2 30.4 29.9

 

Panama's economy grew 8.4% in the third quarter of 2010 according to data of gross domestic product (GDP) released by the National Institute of Statistics and Census (INEC). This occurred at a time when even Panama Canal expansion by 5.250 billion dollars has not entered its peak construction. Moreover, construction of the first line of subway in Panama City in by US$1.446 million would only be starting in 2011. Similarly, construction of a copper mine for a total investment of 4.320 billion dollars just be starting also in 2011. US$4.377 million have projected electricity sector investment over the next six years, according to a report released recently by the Public Services Authority (ASEP). Panamanian Association of Hotels (APATEL) has estimated hotel investment by 2.387 million dollars in 2010-2012. Government plans to make public investments by US$13.6 billion in 2010-2014. That is, Panama's economy is growing very strongly, not yet fully entered the large investment projects. Cumulative growth of the first three quarters was 7%. The strength of the Panamanian economy is evident in the business environment and good employment prospects, in fact recently announced by Manpower.

This growth of 9.2% in 2011 will lead to decrease of one percentage point of unemployment rate, placing it at 5.5% in August 2011. By 2012 and 2013, unemployment rate will drop to 4.6% and 4.2% respectively because double-digit economic growth during those years. Panama's labor force, measured by economically active population, will grow by 3.3% average annual during 2011-2014. Private enterprise participation on employed population will expand due to strong growth of formal jobs.

Aggregate demand boom, together with increases in oil prices, will lead to important rise of inflation rate, but not as dramatic as before of US financial crisis. Inflation rate will increase to 3.8% and 4.5% in 2011 and 2012 respectively. In fact, inflation rate will stabilize at 3.8% per year, at least until 2014. Specifically, inflation rate will not return to low rates recorded between 1997 and 2006, when annual average rate was only 1.3%.

Competition for skill workers will raise wages, but those who have not skill, most vulnerable groups, will be affected by inflation rates consistently higher than those observed during 1997- 2006.

As a result of high economic growth, fiscal deficit of Non-Financial Public Sector (NFPS) will be only 0.7% in 2011 and will fall to 0% and 0.4% in 2012 and 2013 respectively, when economy is growing at double-digit.

This reduction of NFPS deficit, together strong economic performance, will lead to a dramatic decline in public debt as a percentage of GDP. Public debt as percentage of GDP will decrease from approximately 43.6% in 2010 to only 30.3% in 2014.

Obviously, with this strong economic growth, biggest problems of President Ricardo Martinelli will be high inflation, to maintain high execution of public investment budget and to help to most vulnerable population groups.

In political scene, a economic growth as high as projected by we, together to reduction of unemployment rate, creation of formal jobs, high public investment and improvement in public finances, will incentive to President Martinelli to think in your re-election. In fact, his party (Cambio Democrático) seeks to reform the Panama Political Constitution to eliminate obstacles to re-election. However, in first attempt, Legislative Assembly filed the project of re-election law. Lack of persons with political leadership within party of President Martinelli, get ahead to political opposition in 2014 election, especially Democratic Revolutionary Party (PRD). In this sense, if not achieved the reforms to Political Constitution that allow for re-election, is likely in 2014 election look back a grand coalition to confront the political strength of PRD.

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FORECAST - PANAMA'S ECONOMY KEY INDICATORS    
PRONÓSTICO - INDICADORES CLAVE DE LA ECONOMÍA DE PANAMÁ    
INDICATOR  2007 2008 2009 2010 2011 2012 2013 2014
Economic growth rate (%) 12.1 10.1 3.1 7.1 9.2 13.0 11.0 4.9
Crecimiento económico (%)                
Inflation rate (%) 4.2 8.7 2.4 3.5 3.8 4.5 3.8 3.8
Tasa de Inflación (%))                
Unemployment rate (%) 6.4 5.6 6.6 6.5 5.5 4.6 4.2 3.7
Tasa de desempleo (%)                
Interest rate (%) 8.3 8.2 7.9 8.0 8.6 7.8 8.2 9.4
Tasa de interés (%)                
Fiscal deficit or surplus (as % of current GDP) 3.5 0.4 -1.0 -1.2 -0.7 0.0 -0.4 -1.6
Déficit o superávit fiscal (% del PIB)                
Public debt (as % of current GDP) 53.7 45.0 46.3 43.6 39.7 34.2 30.4 29.9
Deuda pública (% del PIB)                
Last updated: January, 2011                
Última actualización: Enero, 2011                
   
FORECAST - GOVERNMENT'S KEY INDICATORS    
PRONÓSTICO - INDICADORES CLAVE DEL GOBIERNO    
INDICATOR  2007 2008 2009 2010 2011 2012 2013 2014
Government's capital expenditures (in millions of US$)          973.6      1,619.4      1,758.0      2,005.4      2,069.9      2,217.6      2,354.9      2,387.7
Gasto de capital del sector público (millones de dólares)                
Total public debt (in millions of US$) 10,470.6 10,437.4 10,972.0 11,271.3 11,487.9 11,479.6 11,620.3 12,278.6
Deuda pública total (millones de dólares)                
Fiscal deficit or superavit (in millions of US$) 683.0 97.8 -253.3 -299.3 -216.6 8.3 -140.7 -658.3
Déficit o superávit fiscal (millones de dólares)                
Debt increase (in millions of US$) 17.9 -33.2 534.6 299.3 216.6 -8.3 140.7 658.3
Aumento o disminución de deuda (millones de dólares)                
Fiscal deficit or surplus (as % of current GDP) 3.5 0.4 -1.0 -1.2 -0.7 0.0 -0.4 -1.6
Superávit o déficit fiscal como % del PIB                
Public debt (as % of current GDP) 53.7 45.0 46.3 43.6 39.7 34.2 30.4 29.9
Deuda pública (% del PIB)                
Risk country - Standard & Poor BB  BB+  BB+             BBB-        
Calificación de riesgo - Standard & Poor Positivo Estable Positivo        Estable         
GDP at current prices (millions of US$) 19,485.4 22,583.0 23,694.3 25,876.4 28,921.6 33,570.1 38,172.0 41,004.2
PIB nominal (millones de dólares)                
Last updated: January, 2011                
Última actualización: Enero, 2011                
               
FORECAST - PANAMA'S ECONOMIC GROWTH RATES BY ECONOMIC SECTORS (%)    
FORECAST - PANAMA'S ECONOMIC GROWTH RATES BY ECONOMIC SECTORS (%)    
ECONOMIC SECTOR 2007 2008 2009 2010 2011 2012 2013 2014
Agriculture 2.7 4.4 -9.2 2.5 9.8 13.3 11.4 5.5
Agricultura, ganadería y silvicultura                
Fishing -3.3 15.7 -3.7 -26.9 9.8 11.7 10.7 7.6
Pesca                
Mining, sand extraction and quarries 24.0 30.9 4.4 5.3 12.8 23.6 15.0 -5.0
Minas y canteras                
Manufacturing 5.6 3.9 -0.4 0.8 10.3 16.2 12.5 2.1
Industrias manufactureras                
Electricity power generation, distribution, gas and water 8.2 3.8 7.5 5.4 9.8 14.4 11.8 4.3
Suministro de electricidad, gas y agua                
Construction 21.8 30.7 4.5 5.3 12.1 23.5 15.1 -5.3
Construcción                
Wholesale and retail, Colon Free Trade Zone 10.7 7.0 1.6 10.1 7.3 12.6 10.4 3.4
Comercio al por mayor, al por menor y en zonas francas                
Hotels and restaurants 14.2 8.3 2.6 10.9 10.8 12.8 11.6 8.0
Hoteles y restaurantes                
Transportation, warehousing and communications 17.0 15.5 6.6 14.8 10.8 13.0 12.3 9.7
Transporte, almacenamiento y comunicaciones                
Banking and other financial services 19.2 14.1 1.6 1.6 4.1 4.9 4.7 3.7
Intermediación financiera                
Real estate and other services 8.6 7.2 4.5 6.9 9.6 13.6 11.6 5.3
Actividades inmobiliarias y empresariales                
Private and public teaching 7.1 1.6 2.4 1.6 5.3 6.9 6.4 3.8
Enseñanza pública y privada                
Private and public healthcare and social services 12.9 1.8 1.1 1.4 6.8 8.3 7.6 5.2
Servicios sociales y de salud pública y privada                
Other social services 14.4 6.8 4.3 5.5 9.4 13.2 11.3 5.1
Otros servicios sociales                
Public administration and defense 3.3 8.5 3.3 4.2 5.0 5.9 5.6 4.1
Administración pública y defensa                
Homes with personal services 1.1 1.8 -0.9 1.2 2.7 2.9 2.9 2.9
Hogares privados con servicio doméstico                
GROSS DOMESTIC PRODUCT 12.1 10.1 3.1 7.1 9.2 13.0 11.0 4.9
PRODUCTO INTERNO BRUTO                
Last updated: January, 2011                
Última actualización: Enero, 2011                
               
FORECAST - PANAMA'S ECONOMIC GROWTH RATES BY TYPE OF EXPENDITURE (%)    
PRONÓSTICO - TASAS DE CRECIMIENTO DE LA ECONOMÍA DE PANAMA POR TIPO DE GASTO (%)    
TYPE OF EXPEDITURE 2007 2008 2009 2010 2011 2012 2013 2014
Private consumption 0.9 12.4 0.9 5.8 9.3 13.2 11.2 5.0
Gasto de consumo final privado                
Public consumption 4.1 4.1 3.8 4.1 4.2 4.3 4.4 4.4
Gasto de consumo final público                
Private and public investment 33.2 30.7 -2.7 3.0 12.6 24.8 15.7 -6.0
Inversión privada y pública                
Exports 22.0 8.0 0.0 6.6 8.8 9.9 10.2 10.6
Exportaciones                
Imports 18.1 12.6 -4.0 3.5 9.4 12.9 11.3 6.3
Importaciones                
GROSS DOMESTIC PRODUCT 12.1 10.1 3.1 7.1 9.2 13.0 11.0 4.9
PRODUCTO INTERNO BRUTO                
Last updated: January, 2011                
Última actualización: Enero, 2011                
               
FORECAST - PANAMA'S POPULATION EMPLOYED    
PRONÓSTICO - POBLACIÓN OCUPADA DE PANAMÁ    
ECONOMIC SECTOR 2007 2008 2009 2010 2011 2012 2013 2014
Agriculture     244,631 243,384 247,391 241,992 234,699 244,024 252,946 265,621
Agricultura, ganadería y silvicultura                
Fishing       11,758 11,204 12,524 11,626 8,170 8,372 8,624 9,231
Pesca                
Mining, sand extraction and quarries          3,729 3,289 3,374 2,807 3,848 4,364 4,670 4,415
Minas y canteras                
Manufacturing     120,108 122,932 125,407 120,519 128,406 136,830 143,180 145,527
Industrias manufactureras                
Power, gas and water          8,339 7,288 8,148 7,613 8,560 8,980 9,341 9,693
Suministro de electricidad, gas y agua                
Construction     124,190 137,824 139,321 141,316 163,528 185,258 198,353 186,945
Construcción                
Wholesale and retail, Colon Free Zone     243,235 261,353 249,175 253,426 295,945 305,647 313,865 322,866
Comercio al por mayor, al por menor y en zonas francas                
Hotels and restaurants       69,521 71,334 77,828 74,839 86,587 89,567 93,021 99,986
Hoteles y restaurantes                
Transportation, warehousing and communication       92,168 101,349 108,698 113,406 129,730 134,545 140,511 153,324
Transporte, almacenamiento y comunicaciones                
Banking and other financial services       28,941 28,428 27,792 27,595 28,810 27,726 27,010 27,882
Intermediación financiera                
Real estate and others       67,088 71,887 77,997 82,787 83,013 86,511 89,794 94,089
Actividades inmobiliarias, empresariales y de alquiler                
Public and private teaching       68,800 76,486 75,940 82,436 79,120 77,629 76,803 79,319
Public and private teaching                
Public and private healthcare and social services        50,958 56,108 59,664 65,466 57,968 57,572 57,639 60,350
Servicios sociales y de salud privada y pública                
Other social services       65,013 70,893 73,681 73,000 80,536 83,643 86,566 90,556
Otros servicios sociales                
Public administration and defense       81,058 79,708 81,992 86,634 85,048 82,617 81,133 84,077
Administración pública y defensa                
Homes with personal services       76,765 77,539 71,206 68,786 75,358 71,141 68,097 69,723
Hogares privados con servicio doméstico                
Organizaciones y órganos extraterritoriales             670 915 663 1,344 1,344 1,344 1,344 1,344
Organizaciones y órganos extraterritoriales                
POPULATION EMPLOYED  1,356,972 1,421,921 1,440,801 1,455,592 1,550,671 1,605,771 1,652,897 1,704,949
POBLACIÓN OCUPADA                
Economically population active  1,449,318 1,505,930 1,541,904 1,557,047 1,640,490 1,682,807 1,726,215 1,770,742
Población económicamente activa                
Population of 15 or more old year  2,309,763 2,356,900 2,403,277 2,450,566 2,498,785 2,547,954 2,598,089 2,649,212
Población de 15 y más años de edad                
Share of Economically population active             62.7 63.9 64.3 64.7 65.7 66.0 66.4 66.8
Participación de la población en la fuerza de trabajo                
POPULATION UNEMPLOYED       92,346 84,009 101,103 101,455 89,820 77,036 73,318 65,794
POBLACIÓN DESOCUPADA                
UNEMPLOYMENT RATE (%)              6.4 5.6 6.6 6.5 5.5 4.6 4.2 3.7
TASA DE DESEMPLEO (%)                
Last updated: January, 2011                
Última actualización: Enero, 2011                
               
PRONÓSTICO - PRODUCTO INTERNO BRUTO DE PANAMÁ POR SECTORES ECONÓMICOS     
(millones de dólares a precios de 1996)    
FORECAST - PANAMA'S GROSS DOMESTIC PRODUCT BY ECONOMIC SECTORS     
(millions of US$ at 1996 constan prices)    
ECONOMIC SECTOR 2007 2008 2009 2010 2011 2012 2013 2014
Agriculture 688.8 719.5 653.3 669.6 735.2 833.2 928.4 979.8
Agricultura, ganadería y silvicultura                
Fishing 356.2 412.2 397.0 290.0 318.5 355.7 393.9 423.7
Pesca                
Mining, sand extraction and quarries 197.8 259.0 270.4 284.7 321.1 396.9 456.6 433.8
Minas y canteras                
Manufacturing 1,126.7 1,170.9 1,165.7 1,174.7 1,296.0 1,505.3 1,693.3 1,729.6
Industrias manufactureras                
Power, gas and water 484.3 502.9 540.8 570.1 625.9 715.7 800.4 834.6
Suministro de electricidad, gas y agua                
Construction 857.1 1,120.3 1,170.3 1,232.2 1,381.4 1,705.8 1,963.4 1,859.7
Construcción                
Wholesale and retail, Colon Free Zone 2,517.7 2,695.2 2,737.4 3,014.0 3,233.9 3,640.5 4,018.7 4,154.6
Comercio al por mayor, al por menor y en zonas francas                
Hotels and restaurants 494.9 535.9 549.7 609.9 676.0 762.2 850.9 919.2
Hoteles y restaurantes                
Transportation, warehousing and communications 3,417.5 3,945.8 4,206.3 4,829.3 5,351.9 6,050.1 6,792.3 7,448.7
Transporte, almacenamiento y comunicaciones                
Banking and other financial services 1,414.7 1,614.6 1,640.1 1,665.8 1,733.8 1,818.8 1,904.7 1,976.0
Intermediación financiera                
Real estate and other services 2,607.7 2,795.6 2,920.0 3,120.1 3,420.8 3,885.8 4,335.7 4,565.8
Actividades inmobiliarias y empresariales                
Private and public teaching 519.3 527.7 540.6 549.2 578.4 618.6 657.9 682.9
Enseñanza pública y privada                
Private and public healthcare and social services 448.6 456.9 461.8 468.4 500.2 541.5 582.8 613.2
Servicios sociales y de salud pública y privada                
Other social services 517.1 552.3 575.9 607.9 664.8 752.6 837.3 880.3
Otros servicios sociales                
Public administration and defense 569.8 618.2 638.8 665.8 699.0 740.1 781.3 813.7
Administración pública y defensa                
Private homes with personal services 112.6 114.7 113.6 115.0 118.1 121.5 125.0 128.6
Hogares privados con servicio doméstico                
Net direct taxes on output 1,133.2 1,175.3 1,251.0 1,366.1 1,445.5 1,626.5 1,800.3 1,886.1
Impuesto sobre los productos menos subsidios                
Minus financial services 379.8 403.9 430.4 446.7 411.4 434.6 456.8 467.8
Menos servicios de intermediación financiera                 
GROSS DOMESTIC PRODUCT 17,084.3 18,812.9 19,402.5 20,786.1 22,688.9 25,636.1 28,466.1 29,862.9
PRODUCTO INTERNO BRUTO                
Last updated: January, 2011                
Última actualización: Enero, 2011                
               
FORECAST - PANAMA'S GROSS DOMESTIC PRODUCT BY TYPE OF EXPENDITURE     
(millions of US$ at 1996 constan prices)    
PRONÓSTICO - PRODUCTO INTERNO BRUTO DE PANAMA POR TIPO DE GASTO     
(millones de dólares a precios de 1996)    
TYPE OF EXPEDITURE 2007 2008 2009 2010 2011 2012 2013 2014
Private consumption    10,085.9    10,760.6    10,862.1    11,495.8    12,564.3    14,218.9    15,810.5    16,597.0
Gasto de consumo final privado                
Public consumption      1,822.0      1,869.0      1,940.4      2,020.8      2,105.8      2,196.6      2,292.3      2,393.5
Gasto de consumo final público                
Private and public investment      3,950.3      5,115.9      4,977.0      5,123.9      5,770.0      7,202.1      8,330.2      7,829.4
Inversión privada y pública                
Exports    13,512.5    14,905.0    14,908.5    15,894.5    17,288.6    18,995.8    20,933.1    23,141.7
Exportaciones                
Imports    12,286.4    13,837.6    13,285.6    13,748.9    15,039.8    16,977.2    18,900.0    20,098.7
Importaciones                
GROSS DOMESTIC PRODUCT    17,084.3    18,812.9    19,402.5    20,786.1    22,688.9    25,636.1    28,466.1    29,862.9
PRODUCTO INTERNO BRUT                
Last updated: January, 2011                
Última actualización: Enero, 2011