Panama’s economy will grow by 2% in 2024, CAF confirms

Panama’s economy will grow around 2% gross domestic product (GDP) this year 2024, when it will face challenges due to falling income due to the canal crisis and the closing of a large copper minethe representative in the country said this Thursday Development Bank of Latin America and the Caribbean-CAF, Lucía Meza.

“We believe that Panama’s growth, and there is a certain consensus among sources who study these issues, will be around 2% this year,” Meza told EFE.

This result, well below approx 7% GDP expansion in 2023, according to the forecasts of the Panamanian government, is a consequence of the fact that the reduction of ship transit through the interoceanic canal due to drought will affect its contributions to the treasury, the representative of the regional bank pointed out.

Meza, in a meeting with journalists specializing in economics this Thursday, explained that another factor affecting the decline in the pace of economic growth in Panama this year is the closure of a large surface copper mine owned by Canadian capital, which was expected to contribute at least 375 million dollars annually to the treasury, after the Supreme Court ruling declared the concession contract unconstitutional.

Last December, the Panamanian government announced a strategy for the orderly and final closure of the mine, whose development will take between 6 and 18 months at a cost of 1.5 million dollarsand the implementation of which could take between 7 and 9 years with the cost in between 800 and 1000 million dollars.

It is possible, explained the representative of the Armed Forces of the Republic of Croatia, that in 2024 Panama “will not be able to comply with its fiscal rule because there will be a larger deficit” due to the decline in national income, so “the price of the debt could be higher and wider. (The country) will have to borrow more to cover the costs he has to pay.”

Investment Grade Panama

But in this complex panorama, the Central American country has room to maintain its investment rating, commented Meza when asked about fears of losing its debt rating.

“We think it is still possible that this will not be the case, that the level of investment will be preserved and hopefully achieved. But again, it will depend on what Panama plans in terms of securities to mitigate this large economic impact that it has with “these challenges, which are twofold: the reduction of the number of ships passing through the canal, which we know is a very important source of income for the country, and the income from the mines, which will no longer be possible and the higher cost of closure,” he said.

Representative CAF In Panama, he reaffirmed that “the risk assessment is a dynamic matrix that depends on many things, but above all on showing that there will be actions that will allow us to control all the country’s challenges.”

The government of Panama assured risk assessment agencies on January 8 that it will respect the fiscal deficit limit of 3% set for 2023 by the law on the matter, and that for 2024 the indicator is estimated at “2% as a maximum”.