World Bank estimates Panama to grow 5.4% in 2017

 World Bank estimates Panama to grow 5.4% in 2017

The organization predicts that the Gross Domestic Product of the isthmus will be the one that will grow the most this year in Latin America and the Caribbean

Mileika Lasso
mlasso@laestrella.com.pa

 

The economy of Panama will grow 5.4% this year 2017, according to the World Bank in its report 'Contra viento y marea: Fiscal policy in Latin America and the Caribbean from a historical perspective'.

The study reveals yesterday that Panama will lead economic growth in Latin America and the Caribbean, followed by the Dominican Republic with 4.9% and Nicaragua with 4.5%.

The Bank's projection, released in an Internet conference, is four percentage points lower than that projected by the Ministry of Economy and Finance (MEF), which this year expects the country's Gross Domestic Product (GDP) to reach 5.8% .

According to the MEF, Panama's growth will be based on the dynamism of the construction, mining and quarrying, financial intermediation and electricity, gas and water supply sectors.

The calculation of the MEF coincides with that given by the International Monetary Fund (IMF).
For its part, for this year the Economic Commission for Latin America and the Caribbean (ECLAC) projects that the Panamanian economy will have a rebound in the order of 5.9%.

Raúl Moreira, director of Economic and Social Analysis at MEF, explained to the media that the growth estimate for the Panamanian economy will continue to exceed the average in Latin America.

ESTIMATED FOR 2018

The estimates given yesterday by the World Bank are based on Consensus Forecasts calculations, which are expected to increase GDP by 1.5% this year and 2.5% by 2018, ending six Years of economic slowdown, including a recession in the last two years.

In the online press conference, the Bank argues that, if materialized, the expected recovery in Brazil and Argentina will largely explain the return to growth in the region. Mexico is expected to grow about 1.4%, while Central America and the Caribbean will maintain a steady growth rate of around 3.8%.

Carlos Végh, the World Bank's chief economist for Latin America and the Caribbean, said that Latin America and the Caribbean have traditionally been pro-cyclical, either because of political pressure to raise spending during the boom or because of lack of access To international capitals in difficult times'.

"As a result, they often fell into a procyclical fiscal trap, which led to more government debt and fiscal deficits, as well as lower credit ratings, leaving them few options to reverse the situation," the Bank representative said.

In response to the global financial crisis of 2008, the number of Latin American countries with countercyclical fiscal policies increased from 10 to 45%. Countries such as Chile, Colombia, Costa Rica, El Salvador, Guatemala, Mexico, Paraguay and Peru began to increase public spending or to lower taxes in an attempt to stimulate the economy. Although these measures resulted in fiscal deficits, they were the result of a concerted effort to minimize the slowdown.

On the other hand, those countries that continued their pro-cyclical policies should now further consolidate their fiscal accounts if they are to minimize the risk of deterioration in their credit rating and an increase in funding expenditure, according to the World Bank report.

From La Estrella