Economic Recovery in Panama Exceeds Regional Expectations with Solid Growth Anticipated for 2023

Anatoly Gaviria Jul 18, 2023

The adviser to the Ministry of Economy and Finance (MEF) reported that the country has experienced a notable recovery, far exceeding the rest of the region, for which reason they anticipate that 2023 will have solid growth.

In 2022, growth reached 15.8%, while in 2021 it was 10.8%. In addition, growth this year is expected to remain between 5% and 6%, above the regional average.

This growth has been achieved together with a low level of inflation and a recovery of formal employment, said the economist, who highlighted the achievements obtained by Panama in its economic recovery process after the pandemic.

According to the adviser, the negative trend in terms of the public sector deficit that began to be noticed during the pandemic has been reversed. Expenditure growth has been reduced, especially current expenditure, which in 2022 fell by 4%, while State revenues have increased. These indicators point towards a frank recovery of the economy.

Although solid growth is expected this year, it will not be at the same rate as in 2022 and 2021. However, indicators, such as the growth of the Monthly Index of Economic Activity (IMAE), predict growth above the regional average. Concrete examples of this growth include a 24% increase in car sales and an 80% increase in occupancy permits in the construction sector during the first quarter compared to the previous year. In addition, Canal revenues from tolls have increased by 17%.

The adviser highlighted that Panama is consolidating its role as a safe center for attracting foreign direct investment. In addition, the Panamanian economy benefits from its low inflation, the use of the dollar as legal tender, and the tax facilities offered to foreign investors.

Likewise, it is approaching formalization and leaving the international gray and black lists, which will help attract more investment and reduce the financing costs of public debt.

Regarding employment, the adviser mentioned that they are awaiting the results of the census to determine the level of unemployment in 2023 compared to previous years. However, they indicated that an improvement has been observed in formal employment, which has increased as a proportion of total employment.

Although the sectors that will lead economic growth in 2023 are not yet clearly established, according to the adviser, in 2022 the key sectors were: construction, commerce, logistics, and international transport, where the Panama Canal plays a fundamental role. These sectors have promoted the process of consolidation and economic recovery of the country.

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