Panama: Economic growth decelerates in Q3 to near one-decade low
December 16, 2019
Economic growth decelerated to 2.7% in annual terms in the third quarter, down from 2.9% in Q2 and marking the worst performance since Q4 2009.
The slowdown was mainly attributed to a weaker services sector (Q3: +2.8% year-on-year; Q2: +3.3% yoy), which was weighed on by a contraction in real estate activities and the hotels and restaurants sector. This came despite an uptick in the all-important transport, warehousing and communications sector, which encompasses activity from the Panama Canal. Meanwhile, growth in retail and wholesale trade—which includes activity in the Colón Free Trade Zone—and financial services both moderated in the quarter.
The industrial sector gained momentum (Q3: +4.1% yoy; Q2: +2.6% yoy), but this belied a contraction in construction activity, which represents more than half of all industrial activity. However, blistering growth in the mining sector more than offset this fall, with output driven by positive results from the Cobre Panama mine. Meanwhile, the primary sector posted its second consecutive quarter of growth (Q3: +6.7% yoy; Q2: 0.9% yoy), driven by surging agricultural production.
Looking ahead, the economy should gain speed into 2020 on stronger domestic demand, while improving output at the Cobre Panama copper mine should support the external sector. Furthermore, mid-January’s signing of a “phase one” trade deal between China and the U.S. bodes well for toll revenue and cargo transit in the Panama Canal.
Author: Stephen Vogado, Economist