IMF lowers growth forecast for Panama and warns of possibility of a higher fiscal deficit

Editorial Dept. Voz de la Diaspora

The International Monetary Fund (IMF) down to 5 percent growth projections for Panama 2019 From a 6% earlier this year by "a slow recovery" of economic performance that takes several consecutive years in slowdown, but said that the country's fundamentals remain "solid", the agency said in a statement.

In 2020 Panama would experience a recovery of growth potential 5½ percent reaching an approximate inflation 2 percent in the medium term.

The IMF took the decision to lower growth forecasts for Panama after completing a mission of several days in the country headed by Alejandro Santos.

"While Panama remains among the most dynamic economies in Latin America, the economic recovery has been slower than anticipated ", According to the official note.

The IMF also warned that preliminary data indicate a fall in tax revenue that contrasts with the acceleration in the implementation of budgetary spending, which will lead to a fiscal deficit in the first half of the year above the limit 2 percent of GDP set for the entire fiscal year rule.

The agency noted that the country also records an accumulation of large sums of delayed payments to suppliers and banks that need to be sold off.

"The authorities estimate that, not having corrective measures, the fiscal deficit could reach almost 4 percent of GDP in 2019 ", He said the IMF.

He said that the authorities were committed to taking the necessary corrective measures, but "they fear that rapid implementation of these measures could further weaken the recovery process".

In that context, They hope to reduce the fiscal deficit by more than 2 percent of GDP in the next two years, allowing them to meet to 2021 with the deficit limit of 1¾ percent of GDP notes the Law on Social Responsibility and Fiscal, According to the statement the IMF.

The new government of President Laurentino Cortizo who started the 1 July said it would take legacy commitments, including paying contractors with the government could achieve a 1000 millions of dollars, Short term which would boost the domestic economy.

Panama recorded a marked slowdown in growth in the last five years, partly affected by the downturn in the economy and global trade, but nevertheless, I remained the best performing country in the continent driven by sectors linked to external market operations in the Panama Canal, the ports, and the transport.

While domestic sectors fell, especially the Colon Free Zone affected by the crisis on the main purchasers of goods, and the construction by the fall in home sales, and the conclusion of private and state megaprojects.

The Central American nation also struggling with a reputational problem arising from scandals such as the "Panama Papers".

Last June was also included in the gray list of the Financial Action Group (offend) composed of countries with strategic deficiencies in its regulatory framework against money laundering.

In that context, Despite recent advances in the financial integrity, including recognition of tax evasion as a predicate offense to money laundering, the regulatory framework should be further strengthened and needs to demonstrate its effectiveness, he said the IMF.