PANAMA | Robust trade dynamics buttress overall economic growth



The economy has shifted into a higher gear, supported by sharp growth in Canal revenues and in key sectors such as ports, construction and transportation. Economic activity logged another sharp expansion in May and the average of the first five months of the year stands at 6.5%, far above last year’s 4.4% growth in the same time period. All available indicators suggests that growth in the second quarter will be robust, buoyed by a double-digit expansion in cargo movements in the January-to-May period and another strong rise in Canal revenues during the same time period. The government unveiled the draft bill of the 2018 budget on 27 July. The budget is 7.9% bigger than the preceding year and envisages large spending on public infrastructure and social services, which should result in economic growth of 6.0% according to the government. 

Panama’s outlook is bright: the economy is set to be the fastest-growing in the region this year on the back of ongoing infrastructure projects and high dividends from the Panama Canal. Nevertheless, a slower-than-expected economic recovery at both a global level and in the region could dampen trade and therefore the country’s growth prospects. Analysts expect the economy to expand 5.5% in 2017, which is up 0.1 percentage points from last month’s forecast, and 5.7% in 2018.