Panama: GDP plunges at record pace in Q2 as Covid-19 restrictions bite
GDP plunged 38.4% year-on-year in the second quarter, after logging 0.4% growth in the first quarter. The print marked the sharpest fall on record. The economy was severely hit by the pandemic-related restrictions imposed in late March, which were only gradually eased from mid-May onwards.
Taking a look at individual sectors, construction led the contraction, falling 89.2% (Q1: -6.9% yoy), after the imposed quarantine halted construction works. Moreover, wholesale and retail sales fell 48.4% (Q1: -2.9% yoy), also hit by social distancing measures. Transportation fell 14.7% (Q1: +4.4% yoy) on reduced international trade and the suspension of international flights, while the hotels and restaurants subsector was down 79.2% (Q1: -5.2% yoy), also hit by the collapse in tourism.
Moving to the third quarter, the economy likely contracted at a slightly softer pace, and this trend should be continuing into Q4. Next year, the economy should rebound strongly as restrictions ease globally. Commenting on the outlook, Joan Domene, senior economist at Oxford Economics, said:
“We have cut Panama’s 2020 GDP forecast from -5.6% to -7.8% due to the country’s strict and protracted virus containment measures. However, we now expect an 8.2% GDP rebound in 2021 on the back of extensive government support, followed by a 5–6% expansion in the medium term. Risks remain tilted to the downside as the effects of tropical storms add to a softer second round of restrictions in a combo that could delay the economic recovery.”