Panama: Economic growth decelerates slightly in Q3
December 16, 2016
In Q3, the Panamanian economy failed to build on the gains made in the second quarter. The economy expanded 4.8% over the same quarter of last year, marking a deceleration from the 5.2% expansion observed in Q2. The figure is somewhat disappointing taking into account that the economy was expected to capitalize on the additional earnings generated by the expanded Panama Canal that opened in late June. In fact, the government lowered its 2016 growth forecast in December from 5.6% to 5.2%, a notch below FocusEconomics’ forecast of 5.3% growth. Despite the downward revision, Panama remains one of the most dynamic economies in the region and has been able to weather flagging global trade and a potential backlash from the Panama Papers scandal.
Data released by the National Comptroller’s Office (Contraloría General de la República) showed that the slowdown was driven by weaker growth in the country’s service sector, which decelerated from a 4.6% annual expansion in Q2 to 4.1% in Q3. This reflected a moderation in the growth of financial intermediation services, real estate activity and wholesale trade. Conversely, the secondary sector picked up steam in the third quarter of the year (Q2: 6.5% year-on-year; Q3: 6.7% yoy) on the back of solid growth in all four sub-components of the index. Lastly, the contraction in the primary sector eased in the third quarter.
The economy is expected to remain resilient despite mounting external economic headwinds and to accelerate next year. The government stated that the election of President Donald Trump in the United States, Panama's largest trading partner, should not impact the economy since improving conditions in Latin America should boost economic activity. The short-term impact of the Panama papers scandal also had a limited impact on the economy. According to the government, FDI has surged during the first three quarters of the year and bank deposits have increased by over USD 1.0 billion in the January to September period.