Growth reaches 4.9% in H1 forces weakens prospects for the rest of the year
Real GDP grew 5.2% y/y in Q2 compared to 4.6% in Q1; growth in H1 was 4.9%, which suggests a growth rate for 2016 below the 6% estimates of the Panamanian Government and international agencies. The leading sectors were: electricity, gas and water supply; mining, construction and financial intermediation. However, the primary sector (agriculture, livestock and fishing) as well as manufacturing and transportation and communications continue to show a decline in the second quarter. IMAE showed a growth of 3.04% in July and 4.13% YTD.
The economy’s overall performance growth was stable during the last three quarters. Growth volatility, as implied by the gap of Bollinger bands applied to quarterly IMAE and GDP growth, is at an all-time low for both measures. However, if the trend continues close to the four quarter moving average, growth for 2016 will be close to 4.6%, similar to our projections in March.
This estimate could be considered optimistic because it is based on the current trend that does not incorporate any unexpected deterioration in the international outlook, although there are already signs of this downtrend from July and August figures.
Inflation is still low as oil prices remain stable and economic growth is slowing down. The CPI increased 0.5% YTD as well as in the month of August. We expect the CPI inflation rate to pick up in the following months and reach 0.7% on average for the year.
Balance of payments data for the first semester of 2016 present a current account deficit of $1.2 billion, 4.6% of GDP. This was significantly lower than the 9.7% for the same period in 2014 and 6.1% in 2015. Exports of goods declined 13.7%, from $6.4 billion to $5.5 billion. However, imports declined more (-13.2%), from $11.1 billion to $9.6 billion due to reductions in oil prices, value of construction materials and durables imports. The balance on the services account declined by 0.8%. As a result, overall trade surplus reached almost one billion dollars, 3.7% of GDP.
Foreign direct Investment (FDI) totaled $3 billion in the first semester, 11.2% of GDP. Reinvested earnings of international firms represent close to 55% of FDI. Banks and CFZ firms continued to reduce their capital inflows but “other firms” made up the most important part of this reinvestment.
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