Panama leads the region's economy and projects sustained growth

Posted on 2024-12-08

Economic growth projections for Panama in 2024 and 2025 are encouraging. According to an analysis by JP Morgan, Gross Domestic Product (GDP) growth for 2024 is estimated at 5.2%, with Moody's projecting 4%, ECLAC 3%, the International Monetary Fund (IMF) 2.5%, Barclays 2.2% and EIU 2.0%. For the fiscal year 2025, Moody's and Barclays expect growth of 4.5%, while the World Bank projects 3.5% and EIU (Economic Intelligence Unit) 3.3%, Chapman highlighted.

The Minister underlined the structural diversity of the Panamanian economy, highlighting that the services and construction sectors have been key drivers of growth in recent decades. In terms of participation, construction accounted for 19.7% in 2023, real estate services 11.1%, electricity and water supply 9.0%, trade 8.8%, art and entertainment 8.1%, and transportation and storage 7.6%.

Chapman also noted that inflation in Panama has remained among the lowest in the region, thanks to the monetary stability provided by dollarization. As of July 2024, average inflation in Latin America is 5.2%, while in Panama it stands at just 1.1%.

At the end of August, the balance of treasury notes and bonds reached USD 5,896 million. In this context, the Republic issued Cabinet Decree No. 34 on August 6, 2024, authorizing a rotating program of local issuances for an amount of up to USD 6,000 million, with terms of between 2 to 10 years in various fiscal years.

The Minister explained that through this decree, a new Treasury Note was issued with an interest rate of 6.625% and maturity in August 2029, with an authorized amount of up to USD 1,000 million. Through the market maker program, monthly Treasury Note issues have been carried out, with 8 auctions in fiscal year 2024, which received bids for USD 918 million, with approximately 46% of them being awarded.

As part of a strategic and responsible approach, the Ministry of Economy and Finance has implemented spending containment measures, projecting a reduction of B/. 1,387 million for 2024 and a 2025 budget that reflects transparency and reliability.

The initiatives include strengthening the Fiscal Social Responsibility Law, which seeks to increase the clarity and credibility of tax regulations, as well as improving the independence of the Fiscal Council to ensure transparency in tax policy. In addition, the cancellation of accounts payable to suppliers exceeding B/. 800 million is planned.

The Government Strategic Plan 2025-2029 also includes a sustainable fiscal framework and a five-year plan for public investments, along with the placement of debt in the local market to reduce financing costs and the implementation of technology to maximize transparency and efficiency in public administration.

With these strategies, Panama continues to reaffirm its stability and potential as a dynamic economic center in the region.

The Republic of Panama has reached a new milestone by becoming a high-income country and a leader in economic progress in the region in this century, highlighted the Minister of Economy and Finance (MEF), Felipe Chapman, during the investors forum organized by the Latin American Stock Exchange (LATINEX).

Economic growth projections for Panama in 2024 and 2025 are encouraging. According to an analysis by JP Morgan, Gross Domestic Product (GDP) growth for 2024 is estimated at 5.2%, with Moody's projecting 4%, ECLAC 3%, the International Monetary Fund (IMF) 2.5%, Barclays 2.2% and EIU 2.0%. For the fiscal year 2025, Moody's and Barclays expect growth of 4.5%, while the World Bank projects 3.5% and EIU (Economic Intelligence Unit) 3.3%, Chapman highlighted.

The Minister underlined the structural diversity of the Panamanian economy, highlighting that the services and construction sectors have been key drivers of growth in recent decades. In terms of participation, construction accounted for 19.7% in 2023, real estate services 11.1%, electricity and water supply 9.0%, trade 8.8%, art and entertainment 8.1%, and transportation and storage 7.6%.

Chapman also noted that inflation in Panama has remained among the lowest in the region, thanks to the monetary stability provided by dollarization. As of July 2024, average inflation in Latin America is 5.2%, while in Panama it stands at just 1.1%.

At the end of August, the balance of treasury notes and bonds reached USD 5,896 million. In this context, the Republic issued Cabinet Decree No. 34 on August 6, 2024, authorizing a rotating program of local issuances for an amount of up to USD 6,000 million, with terms of between 2 to 10 years in various fiscal years.

The Minister explained that through this decree, a new Treasury Note was issued with an interest rate of 6.625% and maturity in August 2029, with an authorized amount of up to USD 1,000 million. Through the market maker program, monthly Treasury Note issues have been carried out, with 8 auctions in fiscal year 2024, which received bids for USD 918 million, with approximately 46% of them being awarded.

As part of a strategic and responsible approach, the Ministry of Economy and Finance has implemented spending containment measures, projecting a reduction of B/. 1,387 million for 2024 and a 2025 budget that reflects transparency and reliability.

The initiatives include strengthening the Fiscal Social Responsibility Law, which seeks to increase the clarity and credibility of tax regulations, as well as improving the independence of the Fiscal Council to ensure transparency in tax policy. In addition, the cancellation of accounts payable to suppliers exceeding B/. 800 million is planned.

The Government Strategic Plan 2025-2029 also includes a sustainable fiscal framework and a five-year plan for public investments, along with the placement of debt in the local market to reduce financing costs and the implementation of technology to maximize transparency and efficiency in public administration.

With these strategies, Panama continues to reaffirm its stability and potential as a dynamic economic center in the region.