Excerpts from the latest IMF report:
The strong economic performance of the last few years continues, despite the deteriorating global environment. Panama was one of the fastest growing economies in the world in 2007 with real growth rising to 11.2 percent, following an average growth rate of nearly 8 percent in 2004-06.
Construction soared, and the well developed financial center quickly responded to new opportunities and has attracted significant new investment. At the same time, employment expanded significantly, leading to a decline in unemployment to an unprecedented low level.
Like in the rest of the region, inflation has sharply accelerated, reaching almost 9 percent in May, after averaging about 1½ percent in the last twenty years. Although the surge in inflation is mainly due to higher global food and fuel prices and distortions in the agricultural sector, core inflation (excluding food and fuel) is rising as well reflecting the buoyant economic growth and the emergence of some capacity constraints.
The public finances have remarkably strengthened. The overall balance of the nonfinancial public sector (NFPS), excluding the Panama Canal Authority (PCA), turned from a deficit of about 5 percent of GDP in 2004 into a surplus of 3.5 percent of GDP in 2007, despite a major increase in capital spending in 2007.
The strong fiscal performance combined with the fast pace of growth has led to a rapid decline in the public debt ratio. A new Fiscal Responsibility Law (FRL) that sets a deficit limit of 1 percent of GDP for the NFPS, excluding the PCA, and a debt target of 40 percent of GDP by 2015 was approved by the National Assembly in early May and should help sustain the improvements in public finances.
From Panama Investor Blog
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