Panama Forecasts 2% GDP Growth in 2024

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By Marco Echevarria

This result, well below the around 7 % of GDP expansion in 2023 according to the forecasts of the Panamanian government.

Panama’s economy will grow about 2 percent of gross domestic product (GDP) on 2024, when it will face challenges due to the fall in revenue due to the crisis in the canal and the closure of a large copper mine, said on Thursday the country representative of the Development Bank of Latin America and the Caribbean-CAF, Lucía Meza.

“We consider that Panama’s growth, and there is some consensus among the sources studying these issues, is going to be about 2 percent” this year, Meza told EFE.

This result, well below the approximately 7 % of GDP expansion in 2023 according to the forecasts of the Panamanian government, is due to the fact that the reduction of the transit of ships through the interoceanic canal due to the drought will impact on the contribution of the latter to the tax office, said the representative of the regional bank.

Meza explained in a meeting with journalists specializing in economics on Thursday that another factor that has an impact on the fall in the pace of economic growth in Panama this year is the closure of a large open-air copper mine of Canadian capital, which was expected to contribute at least 375 million dollars a year to the tax office, after a Supreme Court ruling declared the concession contract unconstitutional.

The Panamanian Government announced last December a strategy for the orderly and definitive closure of the mine, the development of which will take between 6 and 18 months at a cost of 1.5 million dollars, and whose execution could take between 7 and 9 years at a cost of between 800 and 1 billion dollars.

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It is possible, explained the representative of CAF, that this 2024 Panama “cannot comply with its fiscal rule because there will be a greater deficit” in the face of the fall in national income, so “the price of indebtedness could be higher and broader. (The country) is going to need to borrow more to cover the costs it has to pay.”

The degree of investment of Panama

However, in the face of this complex panorama, the Central American country has room to preserve the degree of investment, Meza said when consulted because of fears about the loss of the debt rating.

“We think it is still possible that this is not the case, that the degree of investment will be preserved and hopefully it will be achieved. But again, that will depend on what Panama projects in security to mitigate this great economic impact that it is having with these challenges, which are double: reduction of ship passage through the canal that we know is a very important source of income for the country, and the revenues of the mine, which will no longer be possible, and the higher cost of closing,” he said.

The representative of the CAF in Panama reaffirmed that “risk rating is a dynamic matrix that depends on many things, but above all on demonstrating that there will be actions to control all those challenges in the country.”

On January 8, the Government of Panama guaranteed the risk qualifiers that it will meet the fiscal deficit limit of 3 % established by 2023 in a law on the subject, and that by 2024 the indicator is estimated at “maximum 2 %.”

This article has been translated from the original which first appeared in Pan America