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Panama Inflation January 2023

Panama: Inflation increases in January for a third consecutive month

Inflation came in at 2.7% in January, which was up from December’s 2.1%. January’s figure marked the highest inflation rate since July 2022. The acceleration was largely driven by rising prices for housing and energy likely due to start-of-year adjustments in bills. Food and non-alcoholic beverages inflation also continued to accelerate. That said, price pressures in transport declined; in February, the government prolonged the fuel subsidy, which has been in force since last July, until 1 April.

Meanwhile, the trend was unchanged, with annual average inflation coming in at December’s 2.9% in January.

Finally, consumer prices rose 0.94% in January over the previous month, accelerating from December’s 0.17% rise. January’s result marked the highest reading since June 2022.

Although inflation reached its highest print since July, it remained below the elevated levels seen in H1 2022—inflation peaked at 5.2% in June 2022—which led to large strikes and cost-of-living protests in July.

Looking ahead, inflation should ease slightly from current levels this year amid lower commodity prices and normalizing supply chains. Dynamic domestic demand growth and the removal of the fuel subsidy pose upside risks to inflation. Accordingly, a key factor to watch includes renewed unrest and roadblocks—if inflation rises further—which could lead the government to maintain support for longer.

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