Panama's Bright Economic Outlook

Cutting across the Americas, Panama was always a country of strategic interest to the world’s powers. The Panama Canal, which is currently undergoing a multi-billion dollar expansion, is the quickest pathway across the Americas for goods and services. For a long time, the Canal was the only strong economic sector of Panama’s economy, accounting for the lion’s share of the Panamanian economy’s GDP. In the past decade, however, Panama’s economic fortunes have been on the upswing, as the country is no longer reliant on the Canal to power its economy.

Indeed, Panama’s economy is experiencing real, exciting growth, making Panama’s one of the most successful economies in Latin America. According to the International Monetary Fund, Panama's economy is growing at a rate of around 10 %, and over the past decade has averaged growth of approximately 8.5 %. Even more impressively, Panama is one of few emerging economies committed to protecting workers and bridging the gap between the rich and the poor. Five years ago, Panama's government raised the minimum wage. The common argument against a minimum wage is an increase in unemployment, but Panama has proved that a minimum wage and a strong labor market are not mutually exclusive. Indeed, despite having a minimum wage, Panama's unemployment stands at a paltry 4 %. 

Unlike past decades, Panama's strong economic performance is no longer exclusively powered by the Canal. The country has seen an inflow of investment, both domestic and foreign, in the country's economy. Panama's economy has also benefited from the full dollarization of its currency, which has been a welcome economic stabilizer. The combination of currency stability, more foreign investment and economic growth has helped the government consolidate its debt down to only 39 %. In finance, Panama's economy was also more resilient to the economic shock of the 2008 financial crisis than most other countries. Indeed, the high capital and liquidity ratios and the ownership structures of banks have resulted in a strong banking system that has ably survived the 2008 financial collapse. Panama's banking system is one of the country's fastest growing economic sectors, as it has become a regional financial hub. Indeed, the country markets itself as the "Switzerland of Latin America". 

In light of the recent slow down in the BRICS, Panama is definitely a country to look out for. If it continues to grow at its current pace, Panama promises to become a leading economy in Latin America and a valuable area of growth for global investors.

By,

CSBR

 

Sources:

http://www.imf.org/external/pubs/ft/survey/so/2013/car032713a.htm