According to the estimations of the Ministry Economy and Finance, Gross Domestic Product (GDP) in Panama for the end of 2014 resulted 6.3%, confirming the trend of economic slowdown, which began in 2013 (8.4%). However, a new study by Inside Panama Economy, argues that the country's economy will grow at double digit rates, specifically 11% in 2018.
The study called Panama Economic Projections 2014-2019, which was presented by economist Ricardo Gonzalez during a meeting organized by the Association of Economists of Panama, explained that the rates of growth of the Panamanian economy has been linked largely to the public investment fluctuations and dynamics.
It is estimated that the first 2015 year of the presidency of Juan Carlos Varela, the country will grow at comparatively slow rate of 5.2%. Such fact is explained as the strategic plan of the state investments only assumes design and tender steps for the major part of works this year, total value of which is almost $20 billion dollars. However, starting from 2016 the economic growth will increase its pace and in 2018 should reach double digit 11%, as a result of the expansion public investments, added private investments and entry into operation the 3rd set of lock of the Panama Canal.
According to Gonzalez, the most booming sectors of the economy will be construction, mining and quarrying, commerce, transport and real estate. He added that such strong growth will go hand in hand with a significant expansion in demand for electricity.
The study also assumes that for the period of 2014-2019 such measures as price control for 22 products of the food basket established by government together with projected low world prices for oil will keep inflation in Panama below 3%. However, he admitted that the country will not go back to the inflation rates that Panama used to have between 1997 and 2006, when annual average inflation was only 1.3%.
Gonzalez also mentioned that in order to achieve GDP growth as it is described in the study, the government not only should realize the strategic plan for investments, but also maintain strict fiscal discipline. This is true especially after being the government had been forced to face fiscal deficit with more than $1.5 billion, generated by excessive spending and increasing debt by previous government..
The President of the Macroeconomic Environment Committee of the Panamanian Association of Business Executives (APEDA), Felipe Argote, believes that Panama is doomed to continue to grow at significant rates despite the mistakes of governments, but warned that double digit growth has a negative side: it spins up inflation, as high rates were recorded in 2012-2013.
According to Argote, it is preferable that the country maintains 6-8%, since with such scenario it is easier to keep the inflation under control.
