Growth Picks Up in Q1 Amid Political Uncertainty
GDP grew 6.2% y/y in Q1 2017 compared to 4.6% in Q1 2016. The three drivers were: 1) double digit growth in Colon Free Zone (CFZ) re-exports; 2) an increase in Panama Canal transits due to last year’s expansion, as well as a surge in ports transshipments; 3) construction, driven by private and public investments in infrastructure, such as Line 2 of the Metro and the Minera Panama copper mine.
The Panama Canal contributes 5% of GDP, CFZ 6% and construction 16%. They accounted for around 3 p.p. of the 6.2% overall economic growth of the first quarter. The leading sectors in the first quarter of 2017 were private education (which expanded 11.9% y/y), transportation and communications (10.4%), wholesale and retail commerce (9.5%), construction (6.6%) and mining (6.6%).
Current account deficit (CAD) continues its downward trend and decreased 43.3% in Q1 2017 y/y by reaching $379 million explained a surge in the export of goods and services. As a percentage of GDP, CAD represented 2.6% in Q1 2017, compared to 5.1% in the same period of 2016.
After a full year of operations since the expansion of the Canal, the Panama Canal Authority (ACP) reported 1,535 transits of neo-Panamax vessels (built to transit through the new locks) with half of them being of the containership type and close to a third of them carrying liquefied petroleum gas (LPG). The average transit of six vessels per day in the period was lower than the eight vessels projected, but the last quarter average was closer to the projected number of transits.
The Panamanian democratic regime is weak despite the favorable economic results of the past decade. Analysts urge reforms in the political institutions so they can better represent the interests of their citizens while also fostering the country’s advancement in global affairs.
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