Moody's Projects 4% Growth In The Panamanian Economy By 2025

(MENAFN- Newsroom Panama) For 2024, the risk rating agency indicates that growth will remain at 2.5%, impacted by the closure of the mine.
The Panamanian Economy will grow at a rate of between 2.5% in 2024 and 4% in 2025, according to projections by
Moody's, the risk rating agency that holds the
Moody's Inside LatAm Central America 2024 forum in the country,
in which it analyzes the economic situation and prospects for the region.
Renzo Merino, vice president and senior analyst at Moody's,
explained that in the case of Panama, the economic outlook points to relatively low growth for this year, at 2.5%, due to the impact of the decision to close mining operations last year. This same growth outlook has been given by the International Monetary Fund.“Taking into account the mining issue, as a result of what happened last year, we maintain a relatively low growth outlook for 2024. And for next year, the trend for Panama is close to 4%,” he said. Panama's economy at the beginning of the 2000s showed very favorable growth and fiscal strength. Merino explained that the debt load, which was at 70% in 2005, later dropped to 40%, which placed the country in a good position from the point of view of the sovereign risk rating.
“There is always a risk that when investment grade is achieved, there will be complacency on the part of macroeconomic policy makers, especially when there are increasing challenges that, if not addressed, can lead to deterioration,” said Renzo Merino.

Panama obtained investment grade from Moody's in 2009, and the rating improved in 2012 and 2013. But then it began to deteriorate due to debt issues, management of the situation of the Social Security Fund and other indicators.
Moody's
has Panama in Baa3 rating with a stable outlook since October 2023, meaning it still maintains the country in investment grade.
The vice president for the region said that in the case of Panama, Moody's has emphasized in several analyses the need to address the issue of the Social Security Fund.
“This problem has not been addressed and there is much more urgency,” said Renzo, acknowledging that at this time they perceive that there is more talk about the issue and that the agency will be attentive to the Government's decisions.
Merino also indicated that the debt burden in Panama, as in other countries, remains high, which also affects its credit and risk profile.
“In terms of debt burden, we see that there are two groups of countries, one that has less debt than most governments globally, and there are others, such as Panama, Costa Rica and El Salvador, that have the highest debt burden.” He argues that given this scenario in which governments must pay higher interest on their debt, the space or availability to reserve resources for public investment and to address social spending, among other needs, is affected.
As for governance and social indicators, the analyst indicates that Panama faces relatively low risks, although he notes that social tensions will depend on the management of politics.

MENAFN12092024000218011062ID1108665931