Local economy to shrink this year

According to a report commissioned by Panama’s Chamber of Commerce, they foresee a deterioration of two key sectors of the national economy: tourism and construction.

The survey in which 235 companies took part aimed to measure the index of confidence of the commercial and industrial sectors in the country.

The report said that Panama will be affected in 2009 by limitation in credit, a slowdown in the transactions of the local businesses and a negative impact on tourism, foreign investments and the construction sector among others.

Observers said that it is a fact that the tourism sector is going to be affected by the global financial crisis, because visitors will not have enough money to spend on trips abroad.

The other sector which is suffering greatly according to the report is the construction, which have seen projects paralyzed and the sale of luxury apartments are coming to a stand still due to the world financial crisis.

The gloomy forecast continues when the survey said that 2009 will be a very difficult year, because it is an electoral year, which means that people are going to be more interested in politics than in spending money, while foreign investors will stay away until the new administration takes possession and defines its new economic policies.

Seventy percent of the companies that took part in the survey believe that the next 10 months will be more difficult to obtain financial backing and the trend is that the loans will have higher interest.

The other aspect that worries 50 percent of the entrepreneurs is that although there was an increase in the amount of sales in December 2008, the forecast for 2009 seem to point out to a slowdown and sales will be smaller in comparison with last year.

The Chamber of Commerce believes that foreign investment is an important factor for the economic growth of Panama and for that reason particular attention must be paid to the expectation of the entrepreneurial sector, especially when 41 percent of those who participated in the survey thought that the current socioeconomic environment will not attract major investment.

The study also revealed that the potential principal sectors for investments for 2009 are infrastructure, machinery and equipment, human resources, occupational health, new branches of big companies, raw material, stock of new products and rental of warehouses.

Twenty six percent of those surveyed said that in the year 2009 there will be more jobs than in 2008. However, with the finalization of mega projects such as the Coastal Strip and the Colon-Madden highway more than 4000 workers are likely to lose their jobs.

The Chamber of Commerce concluded that the entrepreneurial sector is willing to maintain a positive attitude and 52 percent of its members are willing to make investments in infrastructure, technology, human resources and other areas during 2009.