Panama: 2024 Article IV Consultation-Press Release; and Staff Report
IMF Staff Country Reports, June 27, 2024
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- Published: June 27, 2024
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400279867.002
Growth and structural evolution
- Between 1994 and 2019, gross domestic product (GDP) per capita increased from 33 percent of US GDP per capita to 48 percent of US GDP per capita.
- Rapid growth was driven by an unprecedented construction and investment boom that included major construction projects, such as:
- the enlargement of the Panama Canal, and
- the Tocumen airport expansion.
- Expansion of the services and logistics sectors benefited from those projects.
Pandemic impact and outlook
- Panama was hit very hard by the Coronavirus disease 2019 pandemic, interrupting prior rapid expansion.
- Unemployment is expected to increase and growth to slow down under current fiscal plans that compress public investment.
Fiscal stance and public investment
- The government aims to reduce the fiscal deficit to 2.0 percent of GDP in 2024.
- As budgeted spending is not consistent with this target, the government intends to meet the target by keeping public investment well below the budget.
- Staff assessment: meeting the 2.0 percent of GDP deficit target through large cuts to public investment would require an unduly large compression of investment when unemployment is expected to rise.
Revenue and policy recommendation
- To maintain room for public investment while meeting the deficit target, increased revenue mobilization is needed.
- Policy implication: prioritize revenue measures over substantial cuts to public investment to avoid worsening labor market outcomes and growth.
Financial stability and banking sector
- In order to safeguard financial stability, it is essential that banks remain well capitalized and liquid.
- Supervisory focus: ensure banks’ capital and liquidity positions support resilience amid slower growth and potential increases in nonperforming assets.
Human capital, governance, and statistics
- Strengthening human capital and governance will help sustain Panama’s convergence toward higher income levels.
- Continued implementation of the national statistical plan will improve the quality and timeliness of key macroeconomic data.
Source: Panama: 2024 Article IV Consultation-Press Release; and Staff Report
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