Panama: Economic headwinds drags economic growth in 2015 to lowest reading since 2010
March 4, 2016
The Panamanian economy expanded 5.3% in Q4 over the same quarter of the previous year. The result came in below the 5.7% increase registered in Q3 and brought full-year growth to 5.8%. Annual GDP growth fell to its worst reading since 2010 and undershot government’s expectation of a 6.2% expansion in 2015. The economy was dragged down by a slowdown in trade in the Colon Free Trade Zone and completion of large-scale infrastructure projects such as the expansion of the Panama Canal. The reading, however, reflects that despite slowdowns in activity related to the service sector, other sectors picked up the slack and helped the economy grow.
The expansion in Q4 was driven by growth in several areas of the economy, in particular the industrial sector, which saw a 30.6% expansion (Q3: +18.6% year-on-year). This partly resulted from a large increase in the electricity, gas and water component as well as in mining and quarrying. Mining and quarrying expanded in response to higher demand from the construction sector since demand for cement rose. The agricultural sector expanded 8.0% annually in Q4, a more moderate rise compared to the 10.4% tallied in Q3. This result came on the back of increased fishing activity, which more than offset a moderate contraction in the agriculture and livestock component. The all-important service sector, on the other hand, contracted 4.6% in Q4 (Q3: +0.2% yoy). The result came on the back of double-digit contractions in transportation and communication as well as in hotels and restaurants. Wholesale and retail sales, usually one of the main drivers of growth, recorded weak 0.4% growth in Q4, matching Q3’s result. The reading reflects the economic headwinds Panama’s regional peers are currently facing and the impact they are having on Panama’s service sector, such as the Colon Free Trade Zone.