Strong growth in economic activity in the first quarter of 2023

Panama’s economy has experienced significant ups and downs in recent years, as revealed by the Monthly Economic Activity Index (IMAE) provided by the National Institute of Statistics and Census (INEC). The IMAE serves as a crucial indicator that measures the overall health of the economy, offering an interesting perspective on the country’s evolution from January 2019 to March 2023.

In January 2019, the IMAE recorded an index of 222.3, with a year-on-year variation of 1.3%. The economy seemed to be on a stable trajectory, but by February, the index dropped to 206.1 due to a -6.2% year-on-year variation. However, the economy quickly recovered, displaying signs of resilience and growth in the following months.

The COVID-19 pandemic hit Panama’s economy hard in April 2020, when the index plummeted to 124.0, with a year-on-year variation of -42.3%. The construction, trade, and tourism sectors were severely affected. As the country struggled to contain the virus’s spread, restrictions and lockdowns impacted economic activity in multiple sectors.

Fortunately, starting in May 2021, Panama’s economy began to show signs of recovery. The index significantly increased, reaching 191.3 with a year-on-year variation of 58.3%. This recovery was driven by growth in construction, trade, and tourism. As restrictions eased and commercial operations resumed, the country experienced an upswing.

It is essential to highlight that despite the difficulties caused by the pandemic, some industries demonstrated resilience and thrived during this period. Construction, for example, experienced a significant boost due to the execution of public and private investment projects. Additionally, trade and financial intermediation services showed good performance.

As we move towards March 2023 (with estimates), the IMAE shows an index of 266.9, with a year-on-year variation of 8.2%. While this figure is encouraging, it is crucial to note that it is less dynamic than the variation observed twelve months earlier, indicating that economic growth may be slowing down.

The challenge now is to maintain the growth momentum and address areas of the economy that have shown weakness. Mining and quarrying, as well as the agricultural sector, have experienced declines and require special attention to foster their recovery and development.

Investment in infrastructure, stimulating local production, and promoting responsible and sustainable tourism are key areas that the government and private sector must focus on. Economic diversification is essential to avoid excessive dependence on specific sectors, which can increase vulnerability during times of crisis.

Moreover, addressing social and environmental challenges that accompany economic growth is fundamental. Creating quality employment, reducing poverty and inequality, and caring for the environment should be at the core of economic policies and strategies.

Panama’s economy has the potential to continue growing and prospering. The country boasts a strategic geographical location, a vital Panama Canal that serves as a trade route, and a diverse economy with growing sectors. However, fully harnessing these opportunities requires a comprehensive and collaborative approach among the government, private sector, and society as a whole.

The IMAE provides valuable information for evaluating economic progress, but it is not the sole tool. Careful analysis and continuous assessment of diverse data sources are required for a comprehensive understanding of the Panamanian economy and informed decision-making.

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