Panama: GDP growth slows in 2014 but outlook of services-oriented economy remains bright
March 3, 2015
The economy expanded 5.8% in Q4 over the same quarter of the previous year. The result came in below the 6.5% growth registered in Q3 and marked the weakest result in five years. GDP expanded 6.2% in the full year 2014, which was the slowest growth rate since 2010. The 2014 result reflects in large part the impact of a slowdown in work related to the Panama Canal expansion, which is now more than 90% complete and scheduled to open for traffic early next year. Despite the slowdown, the economy is expected to continue along a steady growth path going forward, with activity sustained by different service-oriented sectors. Panama is projected to be the fastest growing country in Central America in the coming years.
The expansion in Q4 was driven by growth in several areas of the economy, particular in the services sector. Growth in transport, storage, and communications—which account for roughly 20% of economic output—reached 6.5% (Q3: +3.6% year-on-year). Growth in hotels and restaurants, which form the backbone of a booming tourism sector, was up from 0.6% in Q3 to 2.4% in Q4. Meanwhile, the retail sector expanded 6.4% over the previous year (Q3: +5.4% yoy). The financial services sector, which has become an important pillar of the economy, decelerated from a 5.4% expansion in Q3 to a 2.2% increase in Q4. Growth in construction and in mining and quarrying decelerated but remained in the double digits.
Author: Carl Kelly, Economist