The Challenges Ahead for 2016

PANAMA - Report 30 Dec 2015 by Marco Fernandez

Amidst regional distress, our expectation is that Panama’s GDP will grow 5.6%-5.7% this year. We expect private consumption to continue to offset the fallout from lower private and public investment, as well as the impact of a stronger US Dollar on net exports. The MEF is projecting growth at a similar rate between 5.9% and 6.0%. Most recent data of the Economic Activity Monthly Index (IMAE) published by the Comptroller General’s Office continues to show a slight deceleration: 4.1% growth until October compared with the same period in 2014.

For the 2016-2018 period we project GDP to improve slightly, growing on average 6.2% per year fueled by large investment projects in the energy, ports and mining sectors, as well as the start of operations of the expanded Panama Canal by mid-year.

While the economy is expected to grow at a healthy pace, inflation is projected to remain rather low at 0.3% for 2015, mainly due to the drop in transportation costs prompted by the drop in fuel prices. For 2016 we still expect prices to be relatively stagnant and result in inflation of 0.4% for the year.

As for the level of open unemployment we project a slight increase in the next three years versus the current rate of 3.8%. This is due to the end of the Canal expansion construction activities, although mining will be a substantial source of employment with the start of operations of the copper mine, Minera Panama, in 2018.

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