Panama: Growth slumps to one-decade low in 2019 despite Q4 pick-up
Economic growth accelerated to 3.3% in annual terms in the fourth quarter, up from Q3’s near one-decade low of 2.7%. Nevertheless, total growth for 2019 fell to 3.0% (2018: +3.7% year-on-year), marking the weakest expansion since 2009.
A stronger services sector (Q4: +3.9% yoy; Q3: +2.8% yoy), which was boosted by an uptick in retail and wholesale trade, led the acceleration in the fourth quarter. Particularly, the financial services and real estate sub-sectors propelled the expansion. This more than outweighed a slight slowdown in the all-important transport, warehousing and communications sub-sector—which encompasses activity from the Panama Canal—which was weighed on by lingering global trade tensions in the final quarter of 2019.
Meanwhile, the industrial sector slowed at the end of the year (Q4: +3.0% yoy; Q3: +4.1% yoy), primarily on a continued contraction in construction activity, which represents more than half of all industrial activity. However, the mining sub-sector continued its stellar ascent, driven by strong output from the Cobre Panama mine, thus lessening the overall slowdown. Additionally, the primary sector slowed slightly (Q4: +5.9% yoy; Q3 +6.7% yoy) although still grew for the third consecutive quarter, with agricultural production continuing to expand.
Looking ahead, the economy is expected to gain speed this year on stronger domestic demand, while improving output at the Cobre Panama copper mine should bolster the external sector. Furthermore, thawing global trade tensions seemingly bode well for revenue and cargo transit in the Panama Canal. That said, the coronavirus outbreak and its potentially negative impact on shipping activity provide a major risk to the outlook.