The Mission Concluding Statement from the latest IMF official staff visit to Panama was released on March 17 and provides a very positive review of the country’s economic outlook for 2017.
The Statement affirmed that for Panama, “Growth is expected to remain among the highest in the region, with stable and low inflation, sustainable public debt, and a declining current account deficit.”
Further, the IMF report suggested the Panamanian economy will grow by 5.1% in the short term, and by 5.5% in the medium term. This is slightly less than the government’s economic projections of 5.8% growth in 2017.
The expanded Panama Canal and a wide range of investment projects were cited in the report as the main reasons behind the country’s economic growth.
Mr. Dulcidio de la Guardia, Ministro de Economía y Finanzas de Panamá (Panama’s Minister of Economy and Finance), commented to Bloomberg on April 7 that levies from the Canal are expected to rise 50% to $1.6B in 2017.
This expected revenue increase will follow the 2015 Canal Expansion and the introduction of a new toll structure. Levies from the Canal represent 7% of the government’s fiscal income.
Mr. de la Guardia further explained this new income will help fuel the new metro line in Panama City (expected in 2019) and the expansion of the Tocumen International Airport. These projects alone represent $2.6B of infrastructure investment.
Going forward, the key economic risks for Panama suggested in the IMF report are primarily external to the country. For example, a weaker global growth could result in lower revenues for the Panama Canal. In addition, U.S. Fed rate hikes in the near future could lead to higher inflation in a country that uses the $ USD as its official currency.
Finally, the report highlighted progress towards tax transparency as the main internal risk to address and to maintain the pressure against money laundering. However, the Statement recognized the recent steps that Panamanian authorities had taken towards fiscal discipline, in an attempt to reduce GDP-to- debt ratios.
How to take advantage of Panama’s economic growth?
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