February flash: MEF complies with deficit ceiling and important Panama Canal Authority news

PANAMA - In Brief 11 Feb 2019 by Marco Fernandez

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Fiscal PerformanceAccording to the Ministry of Economy and Finance’s (MEF) latest publication, the deficit of the non-financial public sector (NFPS) represented 2% of GDP for fiscal year 2018, thus barely hitting the ceiling of the Fiscal Social Responsibility law (FSRL). In November, we estimated that complying with the FSRL would represent a very difficult task since up to Q3 the non-financial public sector deficit was 5.1%. Unexpectedly (or perhaps not) the final numbers where exactly on the limit. Therefore, the numbers should be analyzed with caution: Revenues from the non-financial public sector were 3% higher than in the previous year mainly due to an increase in the current income of the general government (3.4%) in spite of a sharp economic slowdown. According to a separate report issued by MEF, Tax revenue grew 3.8% compared with 2017. Direct and indirect tax revenue registered at 9.8% and -2.9% variation respectively. Revenues from the “education fund” (a quasi-fiscal revenue), grew $ 72 million (57%), a figure that cannot be explained by macro figures. The balance of public institutions showed growth of 778%, although in absolute terms the figure is not very significant ($30 million). Total spending grew 553 million (4.1%), a figure explained mainly by the increase in current expenses ($514 million or 5.4%). The capital expenditure showed an increase of only 1%.Table 1 shows the summary of the results.Source: MEF.We anticipate that some payments to suppliers and contractors were postponed until 2019. The next Government will have to deal with an increasing arrears in payables.The primary balance came out at -0.3, a violation of the FSRL.The new Panama Canal...