GDP grew 8.8% up to June. Our forecasts remain positive but lower for 2023. 2024 will be a quasi-stagnant economy after the closing of the mining operation

PANAMA - In Brief 01 Dec 2023 by Marco Fernandez

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The GDP growth rate until June reached 8.8%. For now, without knowing the complete GDP data, which has not been published by the statistical institute, we maintain our annual forecast at 5.5% due to a deceleration in the third quarter and disruptions in agricultural production, tourism, and the Colon Free Zone in the last six weeks. We estimate the GDP deflator at 2.2%, considering increases in unit prices in the Canal (-1.9% in tonnage but +14.9% in revenue up to August), potentially resulting in nominal GDP growth of 7.7%. Achieving compliance with the Fiscal Law in 2023 remains highly challenging. The Ministry of Economy and Finance (MEF) strategically aims to convey a message of responsibility to the markets, as previously announced by Minister Alexander. Awaiting the State budget for 2024, we anticipate that the 2% GDP limit for the year will not be met due to Executive and Legislative pressures to align expenditures with the electoral period ending in May next year. Furthermore, our GDP growth projection for 2024 is 0.8%, assuming no copper exploitation from the Donoso mine throughout the year. The upcoming government will face the challenge of either abandoning the mine (inaccessible for First Quantum) or securing a new operator through a bidding process. However, this endeavor is complicated by a recent law imposing a moratorium on new open-pit mining ventures (and a new agreement on Donoso would constitute a new operation) and opposition from environmental groups, who have politically benefited from protests. The resignation of the Minister of Commerce and Government Spokesperson, Federico Alfaro, following this week's Presidential announcement that no mining ...