Panama Country Risk Report

• While headline growth in Panama will be strong at 11.2% in 2021 and 5.8% in 2022, Fitch Solutions does not expect that real GDP will recover from the COVID-19 pandemic until 2023. A steady rebound of industrial activity and strong export growth will help bolster the economic recovery following the country's 17.9% contraction in 2020.
• The current account balance will return to a deficit in the coming quarters as rebounding imports modestly outpace export growth, widening the goods trade deficit. In addition, stronger profits for foreign-owned corporates that operate in Panama will underpin a greater outflow of repatriated investment income, causing the primary income deficit to swell.
• Panama’s fiscal deficit is expected to narrow to 7.5% of GDP in 2021 and 5.6% in 2022, from 9.8% in 2020, as rebounding economic growth and Panama Canal shipping fees support government revenue. President Laurentino ‘Nito’ Cortizo will likely refrain from pursuing fiscal consolidation in the near term, particularly as his government extends spending programmes to bolster economic activity.
• While Cortizo’s embrace of expansionary fiscal measures and the country’s robust national vaccination programme will help bolster short-term stability, his long-term aim of narrowing the deficit and the potential for constitutional changes highlight key challenges once the economic impact of COVID-19 subsides..

(Source: Fitch Solutions)