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Panama GDP Q1 2018

Panama: GDP Growth slows to over seven-year low in Q1

According to data released by the National Comptroller’s Office (Contraloría General de la República), the economy lost steam in the first quarter of 2018. Economic growth decelerated from 4.9% year-on-year in Q4 to 4.2% in Q1, the weakest expansion since Q3 2010.

The slowdown reflected a deceleration in almost all components of the index. Growth in manufacturing industries decelerated from a 3.4% annual increase in the fourth quarter to a soft 0.9% expansion in the first quarter of 2018. The construction sector expanded 4.9% year-on-year in Q1, down from the previous quarter’s 6.0% expansion. Activity in the sector was dragged down by a drop in the construction of residential and non-residential projects. The transportation, warehousing and communications component, which includes trade activity in the Panama Canal, ports, and airports, expanded 5.2% (Q4: +7.0% yoy). Slower growth was largely attributed to an unfavorable base effect and a decline in cargo movement in Panamanian ports.

More encouragingly, growth in retail and wholesale trade accelerated from a 3.4% increase in Q4 to 3.8% in the first quarter, largely due to a sharp expansion in the Colón Free Trade Zone, the second-largest free-trade zone in the world.

Growth in the second quarter is expected to remain constrained by a month-long labor union strike that brought the construction sector to a standstill in and a soft expansion in April’s monthly economic activity index reading. Furthermore, growing prospects of a full-blown trade war between China and the United States could impact Panama’s trade-related sectors such as the Panama Canal, ports and free-trade zone and weigh on growth prospects in the second half of the year.

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