Brief analysis of the April IMF projections for Panama

PANAMA - In Brief 20 Apr 2022 by Marco Fernandez

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The Panamanian economy will grow 7.5% in 2022 and 5.5% in the medium term, close to its potential. The level of real GDP would be 1.8% higher than the pre-pandemic year of 2019. If these forecasts are correct, the GDP in 2022 at current prices would be USD 70.5 billion (+10.8% from 2021) and the per capita income USD 16,038 (+9.4% from 2021). The April projection is more optimistic than the latest IMF forecast of 5% in October 2021. Furthermore, Panama is part of the group of Latin American countries that will recover its pre-pandemic GDP level this year, along with Argentina, Bolivia, Ecuador, Mexico, and Uruguay. The dynamism of the economic activity in 2022 is explained by the increase in investment, 13.5% growth (the report did not separate public and private), and in exports of goods and services (10% for each). As economic activity recovers, unemployment rate will drop from 11.3% to 9.7%, although still above the pre-Covid year. Inflation (measured by CPI) would reach 3.1%, the highest since 2013, mostly the result of the international increase in prices of oil and staples. However, Panama could be, according to the IMF, the Latin American country with the lowest inflation rate in 2022. In 2022, the fiscal deficit is expected to meet the mandatory fiscal ceiling of 4% of GDP. The projection is one percentage point below last year´s deficit. The debt/GDP ratio will continue its downward trajectory, reaching 56% at the end of 2022. Our comments From the supply side of the ledger, the projected increase in the exports of services could be the result of a rebound of the Colon Free Zone operations and the expansion of international travel and tourism. The available da...