Soft landing predicted for Panama

According to Dow Jones Business News, the Panamanian government’s consolidated budget ended last year with a surplus equivalent to 0.4 percent of the country’s gross domestic product of $97.8 million.

Sources from the government said that the surplus is lower than the 3.5 percent reported in 2007 as a result of higher government spending.

Over the last twelve months the government started a series of ambitious projects such as the Coastal Strip and the creation of a network of roads that might eventually alleviate the traffic congestion in the capital city.

President Martin Torrijos’ administration also had to face demands for a pay rise from pensioners, doctors and civil servants, that added unexpected expenses to the budget.

Analyst, Kathryn Rooney, from the Miami based bank Bulltick Capital Market, said to the Dow Jones that given the circumstances of the U.S. financial crisis and the global turmoil, the fiscal surplus is a positive outcome for Panama. However, the results were below Rooney’s hopes, because she was expecting a surplus of 1.5 percent for 2008.

The analyst said that Panama and Peru are the stars in Latin America, because they are doing particularly well in comparison with Argentina which has ongoing economic problems and Costa Rica where 15,000 people lost their job due to the current economic crisis.

She added that Panama has a diversified economy that depends on several different and performing industries such as tourism, the canal, the bank and the construction sector.

Rooney thinks that Panama is expected to experience a “soft landing” this year as the country is well positioned to weather the global economic slowdown as a result of a strong growth, fiscal surpluses and declining debt ratios.

Nevertheless, signs of distress are beginning to appear in the economy, especially in the real estate sector where the high end of the market is suffering badly and the Colon Free Zone has seen its revenues shrink due to measures imposed by Ecuador and Colombia on goods imported from Panama.

The analyst said that Panama’s economy grew 7.7 percent last year and it may grow around 2.5 percent this year, which is remarkable considering that a lot of countries have not experienced growth over the last 12 months.

For 2009, Rooney expects a deficit of 0.5 percent GDP as tax revenues will fall.

Panama has close links with the United States and whatever happens in that country is going to affect the Panamanian economy.

National exporters are trying to find different markets for their products and negotiations are under way with countries such as Canada, to sign free trade agreements to keep the economy in good shape. In summary, Panama will feel the effect of the global financial crisis, but not as badly as some of its neighbors.