Standard & Poor’s Reaffirms Panama’s Investment Grade at BBB

Anatoly Gaviria Aug 10, 2021

Standard & Poor’s (S&P) reaffirmed Panama’s sovereign rating at BBB , maintaining the country’s investment grade, while the outlook changed from stable to negative, basically due to the impact of the pandemic on the economy.

S&P expects the Panamanian economy to recover in 2021, growing 9%, supported by mining exports and higher private consumption as mobility restrictions ease and vaccination efforts continue. Additionally, they foresee that growth in the medium term will return to its potential of 6%, as public and private investments pick up.

Additionally, the risk rating agency highlights that key infrastructure projects , such as the construction of Metro Line 3, together with a tunnel under the Canal, the extension of Metro lines 1 and 2, a new hospital, transmission projects of energy and road improvements should support the growth and employment momentum for years to come.

The Government expects public-private partnerships (PPPs) to become more relevant, following the recent implementation of the PPP legal framework, beginning with a large 2,000-kilometer road maintenance program.

Finally, S&P indicates that Panama has improved its debt profile in recent years to mitigate refinancing risk. The average maturity of the debt is just under 13 years and 80.5% of the debt is at a fixed rate.

In addition, the weighted average cost was 3.9% in December 2020, and the limited amount of short-term debt (Treasury bills), along with a mostly stable maturity profile until 2024, contains the risk of refinancing.

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