Panama: most successful economy of the region?

ECLAC predicts that in 2017 Panama will grow 5 times more than the regional average

Panama: most successful economy of the region?

According to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) after two years of contractions, Latin America and the Caribbean will grow at an average rate of 1.1% in 2017 thanks to a better international context. It is estimated that the world economy will grow at 2.7% this year, which show a moderate recovery. Besides, there will be an increase in the prices of commodities exported by the region, 12% higher than last year, and a slight rebound of 2.4% in the volume of world trade. However, the growth gap is quite high among Latin American countries, indicating that some economies have done outstandingly better than the others. 

The international dynamics have affected the region in different ways and some countries have taken the lead.  It has been forecasted that South America's GDP will grow 0,6%, whereas  Central America's GDP will expand 3.6% on average,  mainly because of the increased remittances and better expectations for united states growth, which is its main business partner. Among Central American countries, Panama is the most remarkable: it is expected that its economy will increase 5.6%, becoming the country with the best performance for this year in Latin America, according to ECLAC. 

Panama's economy will grow 5 times more than the regional average

This means that Panama will grow 5 times more than the regional average, and it has grown steadily since several years ago. This phenomenon is explained partially by the fact that this country has long-term vision. The public and private sector are committed to the development of key infrastructure works for the country’s progress. For instance, the strong investment aimed to expand the Canal, its main source of income, has been significant for its economy. Another point to highlight is the construction of the Panama City metro, whose first line was inaugurated in 2014. According to ECLAC, it is expected that transport and construction sector boost this economy in 2017. 

Panama is also characterized for been an open economy, always creating a good environment for foreign investors. Legal security and economic stability is one of the main goals  for Panama’s policy makers, for example, the inflation rate has been one of the lowest in Latin America: the average annual inflation rate for 2016, as measured by the variation of the consumer price index (CPI), reached 0.7%. The unemployment rate has been increasing since 2013, but it has been usually below the regional average. For the first quarter of 2017 it was 5.5%. These good figures have encouraged foreign investors to allocate capital in this Latin America country. Foreign direct investment totaled US $1,315.4 million in the first quarter of 2017, 10.7% more than the amount recorded in the same period last year, as reported by ECLAC. According to the Panamanian Comptroller's Office, Panama has been the country with the largest direct foreign investment in the region. 

Encouraging foreign investment is directly related to economic growth

Panama is not only a fast-growing economy; it is also quite competitive compared to its peers.  According to the global competitiveness report 2016-2017, Chile and Panama are the most competitive countries of the region. The Central American country stands out because it climbed 8 positions, occupying the position 32 out of 138 countries evaluated. The study also determined that the degree of openness to international trade is directly related to the country’s innovative potential and its economic growth, as reported in various news outlets. Panama currently has free trade agreements with Canada, Costa Rica, Chile, Taiwan, El Salvador, Guatemala, Honduras, Nicaragua, Peru, Singapore, Mexico and United states, according to infromation from the National Ministry of Commerce and Industries.

 

Latin American Post | Robert Jiménez

Copy edited by Laura Rocha Rueda

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