Panama's Economy Shows Positive Growth in Q1 2023 Despite Some Setbacks

The Panamanian economy continues to exhibit robust growth, with a cumulative increase of 7.75% in the first quarter of 2023. This promising data comes from the latest report on the Economic Activity Index (IMAE) published by the National Institute of Statistics and Census (INEC) of the Comptroller General's Office. While the year-on-year growth rate in March was 8.1%, it was lower compared to the 18.8% surge recorded in March 2022, which was still influenced by the rebound effect following the pandemic-induced restrictions imposed by the government. In this blog post, we will explore the key factors contributing to Panama's economic growth and identify the areas that faced challenges during this period.

Driving Factors for Economic Growth:

1. Construction Sector: The construction industry played a significant role in boosting economic activity. It benefited from both public investment projects and contributions from the private sector. The increased production of pre-mixed concrete and the importation of cement for infrastructure and building projects were among the indicators of this growth.

2. Commerce: Both retail and wholesale trade experienced positive growth due to an increase in re-exports from the Colon Free Zone, higher sales of new automobiles, and greater demand for domestic fuel consumption.

3. Financial Intermediation: The financial sector observed a surge in demand for credit portfolios, an increase in foreign deposits, and a rise in insurance activity during the first quarter. These factors contributed to the growth in financial intermediation.

4. Transport, Storage, and Communications: The services related to transport, storage, and communications also witnessed significant growth. The commercial activity in the Colon Free Zone, toll revenues from the Panama Canal, telecommunications, and container movement all played pivotal roles in this sector's expansion.

5. Industrial Manufacturing: The production of various agricultural products, such as chicken meat, pork, tomato derivatives, and alcoholic beverages, contributed to growth in the industrial manufacturing sector.

6. Energy and Tourism: The energy sector saw growth due to increased electricity generation, both renewable and thermal. Similarly, the tourism industry maintained positive levels, benefiting from higher numbers of tourists and transit passengers. Expenditures by international tourists further boosted this sector.

7. Community Activities and Fisheries: Services related to entertainment and leisure, including gambling in casinos, online betting, and horse racing, experienced positive growth. Additionally, the fishing industry thrived due to increased shrimp and seafood exports.

Challenges and Declining Sectors:

1. Mining and Quarrying: March saw a decline in mining and quarrying activities due to issues in exporting copper minerals and concentrates to international markets. The controversy surrounding the State's contract with Minera Panama impacted this sector.

2. Agricultural Sector: Agricultural activities like banana, watermelon, and pineapple cultivation, cattle breeding, and natural milk production faced setbacks during the first quarter. These challenges were primarily influenced by seasonal and climatic factors.

In short:

Despite facing some challenges in certain sectors, Panama's economy demonstrated overall positive growth in the first quarter of 2023. The construction, commerce, financial, and transportation sectors played key roles in driving economic expansion. Additionally, the industrial manufacturing, energy, and tourism sectors contributed to the country's economic resilience. As the year progresses, policymakers and stakeholders can use this information to make informed decisions and leverage the strengths of these thriving sectors while addressing the concerns of those facing difficulties. By doing so, Panama can continue on its path of sustained economic growth and development.