Panama: Economic growth slumps to one-decade low at outset of 2020
June 19, 2020
The economy expanded 0.4% in the first quarter of 2020 compared to the same quarter a year earlier, down from the 3.3% expansion recorded in the fourth quarter of 2019 and marking the worst growth reading since Q4 2009. Growth took a notable hit at the end of Q1 2020, as the government declared a national emergency over the coronavirus pandemic on 13 March and implemented a national quarantine on 25 March, essentially paralyzing all non-essential activity.
The loss of annual growth momentum in Q1 2020 was due to widespread weakness across sectors. In the primary sector, agricultural production increased at a slower pace in Q1 than in Q4, while output in the fishing sector continued to decline in Q1, yet at a softer rate than in Q4. In the secondary sector, construction activity, which accounts for approximately one-tenth of all economic output, contracted at a sharper pace in Q1 compared to Q4. Manufacturing activity also slumped in Q1. Meanwhile, over in the services sector, retail and wholesale trade activity, which also accounts for around a tenth of GDP, fell in Q1, contrasting an increase in Q4. Activity in the hotels and restaurants sector also tumbled.
The economy is likely contracting in the second quarter. Although the government started relaxing containment measures on 13 May, the relaxation process will be protracted and all activity will remain hampered by strict health and safety rules. Moreover, weak demand abroad will depress trade.
Author: Edward Gardner, Economist