Panama: Economic growth gains momentum in Q2
September 16, 2016
The Panamanian economy gained traction in the second quarter of the year. In Q2, the economy expanded 5.2% over the same quarter of last year, marking an acceleration from the two-year-low reading of 4.6% observed in Q1. The stronger second quarter reading shows that the Panama Papers scandal leaked in April had limited economic impact and that the country’s macroeconomic fundamentals remain solid.
Data released by the National Comptroller’s Office (Contraloría General de la República) showed that the acceleration was driven by a recovery in the services sector, which more than offset a contraction in agriculture and a sharp deceleration in the industrial sector. The all-important services sector, the largest sector of the Panamanian economy, swung from a 2.6% contraction in Q1 to a solid 5.5% expansion in Q2, marking the highest reading in over a year. The second quarter reading was underpinned by buoyant growth in wholesale and retail trade as well as financial intermediation. Growth in the industrial sector decelerated from an 18.3% expansion in the first quarter to 3.6% in the second quarter. The sharp slowdown came on the back of a contraction in manufacturing industries and weaker growth in mining and quarrying as well as electricity, gas and water supply. Meanwhile, the agricultural sector declined at a softer pace in Q2 (Q1: -4.3% year-on-year; Q2: -3.3% yoy).
The Panamanian economy is expected to keep growing at a steady pace. The opening of the expanded Panama Canal in late June as well as large investment in the energy, mining and logistics sectors is expected to shield the economy from external headwinds. The government expects fiscal transfers from the Panama Canal to increase 45% in 2017. Nevertheless, sluggish global trade and ongoing weakness in the global economy will restrain growth and impede the Central American country from reaching the strong growth rates seen in previous years.