Growth exceeded our previous forecast for 2023, but in 2024 it will slow, regaining traction in 2025. Fiscal figures will be favored by Minera Panama's new royalties. Ricardo Martinelli's trial faces a verdict in early July
Growth in the first quarter of 2023 exceeded expectations, much like analysts' forecasts for the global economy. According to our estimates, Q1 GDP may have grown between 9-10%, similar to the year-over-year increase of the Monthly Economic Activity Index (IMAE) through February. The resilience shown by household consumption in the face of increasing interest rates and the significant increase in exports has led us to revise our projections higher. We now project growth at 6.2% for 2023, 2.2 points higher than our previous forecast.
In 2024, economic growth is expected to slow to 4.3% due to weakened consumption and private investment, influenced by higher interest rates and the uncertainties surrounding the upcoming elections. However, in 2025, the economy is projected to regain momentum with a growth rate of 4.9%, driven by anticipated recoveries in consumption, private investment and exports, supported by a more favorable global economic environment and lower interest rates.
Fiscal accounts will benefit primarily from the new royalty agreement with Minera Panama and, to a lesser extent, from increased contributions from the Canal due to tariff hikes, as well as from the reduction of fuel subsidies and the progressive elimination of Panamá Solidario.The NFPS deficit will narrow from 3.9% to 3.0% of GDP from 2022 to 2023, in compliance with the fiscal rule limit (3%). We expect the NFPS deficit to decrease to 2.8% in 2024 and 2.5% of GDP in 2025, and the debt-to-GDP ratio to decrease to 56.6% and 55.5%, respectively, although still far from the 2019 level (44.5%).
Judge Baloisa Marquinez has one week left before announcing the verdict in the New Business case, in which former President Ricardo Martinelli (2009-2014) and fifteen other individuals were prosecuted for money laundering. Martinelli will surely appeal to a higher court (Tribunal Superior), where three magistrates will review Marquinez's decision. According to experienced lawyers this process could take up to three months. The timing of this process is important for the 2024 Presidential elections. Martinelli is ahead in the (still non-official) polls by a wide margin. If the Supreme Court confirms the guilty verdict before February, RM may not run in the 2024 election.
Now read on...
Register to sample a report