Panama: Economy falls at a more moderate pace in Q1
July 19, 2021
According to a preliminary reading, GDP fell at a softer rate of 8.5% year-on-year in the first quarter, above the 10.9% contraction recorded in the fourth quarter of last year. Q1's reading marked the best result since Q1 2020.
The improvement was led by industrial output, which declined at a slower rate of 11.8% in Q1 (Q4 2020: -23.6% yoy), supported by soaring mining production, namely from the new copper mine, and also aided by manufacturing, which fell at a softer pace. However, the services sector contracted 9.7% annually in the first quarter, a slightly larger drop than the Q4 2020’s 9.4% decrease, as activity in the transportation and storage and the financial intermediation sub-sectors deteriorated. In addition, the agricultural sector contracted 0.9% in Q1, marking the worst reading since Q1 2019 (Q4 2020: +4.4% yoy).
Moving forward, a much more favorable base effect, a recovering global economy and recovering domestic activity should all support a strong reading in Q2.
On the outlook, analysts at the EIU added:
“A rebound in global activity will support Panama's recovery; we forecast that real GDP will expand […] despite a weak start to the year amid a second wave of coronavirus cases and a new lockdown. Our forecast for a rebound assumes that vaccine rollout allows activity to increase and the construction and logistics sectors to resume after being hit badly last year.”
Author: Frederico Teixeira de Abreu, Junior Economist