In 2018, Panama will be the country with the highest growth in Latin America and the Caribbean, as predicted at the end of last year by the Economic Commission for Latin America and the Caribbean (CEPAL in Spanish). In its forecasts for the new fiscal year estimates that the country will grow 5.5%; while 2017 closed it with 5.3%, although initially they projected a 5.6%. However, other analyzes, such as the one carried out by the prestigious economist Adolfo Quintero, argue that the country grew by 6.3% in the now concluded year.
Apart from the dance of statistical data, the truth is that the Panamanian economy broke last year a deceleration trend that had dragged on since 2012. It’s the longest slowdown experienced by the country since the return of democracy in 1990.
All the analyzes carried out in the last weeks coincide in pointing out that the trend change and the return to the growth path is due to several elements, but the most relevant have been the recovery of world trade, the economic growth of the United States and the slight upturn in Latin America’s economies, factors that have all influenced the revitalization of the Panama Canal route’s use.
In this order, the opening of the Canal expansion is considered a determining factor in this new scenario because it’s enabling the country’s strategic situation to be put back into value. The Panama Canal contribution to government revenues will represent around 1.650 billion dollars in 2017, approximately 20% of the total revenue that will be recorded by the public coffers. The impact is of an extraordinary magnitude. Adolfo Quintero believes that Panama has great opportunities “to maintain that leadership and attract foreign investment and development of national investment along with public investment”.
The International Monetary Fund said last May in its report on the country that the Panamanian economy “will remain among the most dynamic in the region, with stable and low inflation, sustainable public debt, an increasingly low current account deficit and a stable financial sector “. Its growth forecasts for the country in 2018 also place it in a leading position in the region. Sean Newman, senior money manager at Invesco in Atlanta, told Bloomberg earlier this year that “the growth pace in Panama is still quite impressive for international investors”.
“The country’s solid and stable foundations make it a positive case in the region”, says Emilia Matei, analyst at Standard Life Aberdeen. “The Canal’s expansion benefited from growth acceleration and world trade, and fiscal and external accounts continue to improve. And thus, investors consider it an attractive market to participate”, she says.
The Economic Commission for Latin America and the Caribbean report also highlighted that various sectors of the Latin American and Caribbean economy will show strong dynamism. This will result in a growth rate of the Gross Domestic Product (GDP) in the region of 2.2%, higher than that registered in 2017 (1.3%). This behavior forecast for the new year is partly due to the Brazilian economy’s greater dynamism (2%, compared to 0.9% in 2017). In addition, several countries that were growing at moderate rates will have an economic activity acceleration (for instance, Chile, from 1.5% in 2017 to 2.8%, Colombia, from 1.8% to 2.6%, and Peru, from 2.5% to 3.5%).
Alicia Bárcena, Executive Secretary of ECLAC, during the presentation of the report. Photo: Carlos Vera / ECLAC
In Latin America, after Panama are the Dominican Republic (5.1%) and Nicaragua (5.0%). However, the agency warned of a decrease in Cuba (1.0%), Ecuador (1.3%) and Venezuela (-5.5%), while the rest of the Latin American economies will grow between 2% and 4%. In labor matters, it’s expected that the unemployment rate will begin to decrease as of 2018, in line with the improvement in overall economic growth.
In this slight optimism context, Panama aspires to be a relevant player in the regional economy. For this, it’s considered of great importance to continue exploring the relations with China, to promote all the country’s economic sectors so they grow simultaneously and to counteract external threats to the international service platform. President Juan Carlos Varela has tried to promote trade with China throughout his administration and in June announced that he intended to establish diplomatic relations and break relations with Taiwan. The president visited China in November to continue the commercial negotiations.
In September, the republic’s vice president, Isabel De Saint Malo and the Chinese Foreign Minister Wang Yi, had already signed a bilateral agreement on political consultation mechanism. It aims to strengthen friendly relations between both countries and increase mutual understanding, in addition to developing consultations on the bilateral agenda on issues of common interest.
Héctor Cotes, president of the Panamanian Association of Business Executives (APEDE in Spanish), believes that the country’s great challenge in 2018 is to ensure that the growth initiated in 2017 extends to all economic sectors in Panama, achieving synergies that further boost that increase. Transport and logistics have been the great beneficiaries of this new economic scenario but agriculture and trade need new incentives.
Up to November 2017, the Panamanian public debt registered has a balance of 23,465.52 billion dollars, which represents a growth of 5,826.06 billion dollars since Juan Carlos Varela became president in 2014. This figure is higher than the growth experienced during Ricardo Martinelli’s presidency, which was 114.0 million dollars per month.
Regarding the labor market, the data provided by the report of the High Commission on Employment (November 2014), indicate that the logistics sector, trade, tourism, construction, industry and agriculture maintain from 2015 to 2020 a projection of 232.289 new jobs. Recently the Minister of Work and Labor Development (MITRADEL in Spanish), Luis Ernesto Carles, acknowledged that “Panama has a serious shortage of labor skills, due to the mismatch between supply and demand in training structures”. “Through the Miwladev we advance Government actions in order to minimize this training deficit with programs such as Vocational Guidance and Employment (POVE in Spanish), through which we explain to graduate students the labor trend in Panama so they can identify their interests and clarify their expectations regarding their professional future”, Carles said. According to the latest figures available from the National Institute of Statistics and Census, 47.0% of jobs in Panama are informal, which can generate in the medium term certain inequalities in the country’s society.
