Panama’s economy grew by only 0.4% in the first quarter of 2020. This low growth occurred before the quarantine measures by Covid-19 were implemented, which shows that the country was already heading towards an economic recession, then having been showing a continuous slowdown for several years.
The negative growth in the first quarter was prevented by the transport and logistics activities that serve international trade (Panama Canal, container transshipment ports and air hub), which grew 4.4%; banana exports, which caused agriculture to grow by 6%: and copper exports to China, which made the mining and quarrying sector grow by 103.8%.
Construction contracted by -6.9%, due to oversupply of homes with values above 180 thousand dollars, as well as commercial premises, offices, and the low construction of public investment projects.
The loss of dynamism of the construction sector has also affected the production of cement and ready-mix concrete, impacting the result of manufacturing industries, which contracted by -3.9%.
Hotel and restaurant activity fell by -5.2%, after having also been contracting since last year, also due to an oversupply of the number of rooms that has been reducing net profits for several years, together with a very slow growth of the number of tourists entering the country.
Casino and other gambling activities contracted by -10.1%, due to both the contraction in tourism, as well as the loss of dynamism of domestic demand.
Financial intermediation services contracted -1.4% in the first quarter of 2020, after the growth of loan balances had been slowing down for several years and the growth of profits was slower.
Wholesale and retail trade decreased by -2.9%, notoriously impacted by the activity of the Colon Free Zone, which has been decreasing for several years. Also due to an oversupply of premises and commercial establishments and the loss of dynamism of private consumption.
With the worldwide declaration of a pandemic by the World Health Organization (WHO) and the increase in cases of Covid-19, the government of Panama established strict quarantine measures in the fourth week of March 2020.
During the second quarter many activities stopped completely. The activities most impacted by its total stoppage have been construction, the copper mine, the air hub, shopping malls, all clothing, footwear, white goods and household appliances, the sale of beer and other alcoholic beverages, hotels, restaurants, legal services, accounting services, real estate, business services.
In April, the government issued a decree whereby, due to quarantine, companies could keep their employees suspended. This is that companies could send their workers home without being fired, but without having to pay wages. As of June 19, 250,000 employees had been suspended, of which only 13,000 had been reinstated with the opening of a few economic activities. Currently, 27% of formal non-agricultural employment is suspended. To these figures must be added 146 thousand unemployed who were before the quarantine measures. Informal employment in the country before the quarantine measures was 716 thousand people, who were also restricted mobility. In conclusion, as of June 21, the country’s unemployment rate should be above 35%, however, this data will never be known because the official measurement will be made in August.
In this sense, in 2020 an economic contraction of up to 25% could be expected in the second quarter and 10% annually.
Regarding the evolution of the pandemic in Panama, it is observed that it is in the expansion phase of the contagion curve, which as of June 20, 2020 totaled 25 thousand cases confirmed by test and 493 deaths officially reported by the Ministry of Health.