Inflation in Panama continues to threaten social stability

Panama experienced the consequences last year high cost of living when the country was paralyzed for a month due to popular protests caused by the increase in fuel prices.

This situation fulfills the premise that the greatest enemy of economic stability is inflation, as he described Carlos Barsallo, Executive President of the Association of Banks of Panama (ABP).

However, at the moment when the Government began to cancel the subsidies that were implemented during the most difficult moments of the pandemic and the social crisis from July last year, external factors they continue to represent the Sword of Damocles over the fragile Panamanian economy.

“That’s why you see these unprecedented measureswhat we’ve experienced in the last year with rates rising as fast as ever in history,” the banker said.

These measures at the international level were taken due to the urgency of their application before the inflationary process gets completely out of control and ends up wiping out savings and people’s purchasing poweraccording to Berguid.

“As people see their purchasing power decline, there is less and less money available make other expenses; That’s why it concerns everyone,” he said.

He reminded that for decades Panama was blessed with relatively low inflation compared to previous times, but this past year was higher than historical average.

This inflationary process occurs at a time when the country has a relatively high level of unemployment, so there is not much internal demand that creates upward pressure on prices, however, the influence was felt from outside.

This is how he explains it former Minister of Economy, Frank De Limawhich states that there are external factors that affect us, such as the price of oil, among others.

“There is an increase in interest rates locally and globally; price controls on some basic basket products have distorted the measurement of food prices, but if you draw the equation, if you have felt and there was an increase in the price of food and going outDe Lima said.

In addition, the former minister highlighted other factors such as problems in supply chainfirst because of the pandemic in China, which affected production, and then because of the war between Ukraine and Russia, they caused increase in the cost of goods and services.

If one looks at the inflation levels in Panama compared to other countries, one would think that the situation is under control, however, it must be taken into account that consumer price index it is calculated in a general way.

When information is disaggregated, as set forth in economist Felipe Argotethe landscape is different.

“Inflation is measured in broad termsnot only food, which may be growing in double digits, but since the other costs did not go up or down, it is measured as if it were less,” he illustrated.

And what cannot be denied is that a large part of food has risen in price by up to 30 percent in the last year, according to data from National Institute for Statistics and Census (Inec)which in addition to the fact that people have less income makes them suffer from expenses.

“The purchasing power of all people who have a job is definitely lower, because things cost morethat’s why they get that perception, which is reality”, said the economist.