From person-to-person distancing to person-to market contacts: the journey to recovery

PANAMA - Report 27 Apr 2020 by Alex Diamond and Marco Fernandez

The economic performance of Panama in 2020 may be slightly less optimistic than the projections of the multilaterals and rating agencies suggest (on average -2.0%), according to our estimates. The financing of a 6% NFPS deficit is almost complete, with a small gap to fill this year. We project a current account deficit of about half of last year’s, financed mainly with government net external flows and a lower-than-usual FDI. Unemployment will hit double digits when the August survey is published, whether the economy opens soon or not. We project a 0.5%-1.0% deflation rate. Fiscal policy has been effective in financing the social programs related to the pandemic, but credit policy has not. Within the next two weeks, the government will present a strategy for sectorial and regional activation.

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