Growth seems to pick up, but differences between the estimates by INEC and the MEF are large

PANAMA - Report 26 Nov 2021 by Marco Fernandez and Alex Diamond

The Monthly Economic Activity Index (IMAE) grew 18% in September compared with the same month of 2020, according to a preliminary (and revisable) information from INEC. Mining, construction (especially public works), retail, the Colon Free Zone, telecommunications, seaports, Panama Canal tolls, private health, manufacturing, and agriculture were the key drivers for the month. As expected, tourism, banking and real estate activities continue to decline. INEC announced a revision of the methodology to calculate national value added by changing the base from 2007 to 2018 (apparently), which will change the composition of the national income accounts towards services. This change of base is likely to show higher nominal GDP during the last five years. The relevance of the revised nominal GDP level for 2020 is that nominal growth for 2021 is now 7.95% rather than 10.07%. Even under the assumption that the implicit deflator does not accelerate, it is difficult to anticipate the growth rate that the recent IMAE numbers suggest. On November 23, the Minister of Commerce (not the Minister of Economics and Finance), using the IMAE document, stated that the economy will grow 12% in 2021, although the MEF figures show a much lower result. Unless there was a strategy to create a positive environment for investors, it appears that the communication between ministers is inefficient.

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