A solid pace of recovery in 2022 and 2023. The month of May will be an important one for local politics
The economy will grow 6.4% in 2022 and 4.9% in 2023. The main drivers will be investments and exports. The former, both private and public, are expected to lead growth due to a low comparison base. The latter, in particular tourism and air transportation, will grow at a solid pace. External conditions regarding higher oil and commodities prices, driven by uncertainty arising from the Ukraine invasion and the expected lower global trade volume this year, represent significant risks for Panama. In 2022, we expect a spike in the current account deficit (from 2.2% to between 2.8-3.5% of GDP in 2022), an NFPS deficit 1 p.p. above the maximum by law (5.0% of GDP in 2022), a surge in average annual inflation (from 1.6% to 3.7%) and a rate of unemployment rate that will not decline to pre-pandemic levels (10.6%, 3 p.p above 2019 levels).
In the political arena, three upcoming events are worth mentioning. First, the internal elections of key leadership positions of the ruling party, the PRD, could change the balance of power between the executive and legislative, as the two main figures of the ruling party represent each body aspiring to control the PRD, the largest political party, in Panama. Second, we think it is likely that next week´s hearing of a key money laundering trial involving a former president will use technicalities to allow the case to expire. The involved former president is favored in the polls for the 2024 election. Last, the former president´s two sons, who await a verdict in an international case of money laundering associated with Odebrecht in a US federal court, are facing a 10-year jail sentence. We do not expect the results of that trial to affect the ex-president electoral prospects.
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