Q3'20: Worse than expected

PANAMA - In Brief 15 Dec 2020 by Marco Fernandez

---

Third quarter data confirm our gloomy forecast for 2020: 23.6% drop in Q3 and 20.4% up to September.Today, the National Institute of Statistics and Census (INEC) presented the results for Q3. They were pessimistic as expected, and more. Real GDP fell by 23.6% compared with Q3 2019, which itself was a bad quarter compared with 2018. The decrease in GDP from January until September was 20.4%, a figure that predicts that the recession for 2020 will be harder than our estimates for the full year (13.6%) and the projections by analysts and the government (lower than 10% in general).Construction (-52.9%), retail and wholesale commerce (-24.6%), activities that represent more than a third of the level of GDP, were the hardest hit. Manufacturing, (-26.2%) and tourism (-51.4%) also decreased sharply. Agriculture (3.0%), government (9.2%), ports (5.3%) and transportation (7.1%) had good three quarters. Copper mining (23.2%) was the most dynamic sector, although it represents around 3.4% of GDP.The implications for the fiscal situation is reflected in the probable level of GDP at the end of the year and the Fiscal Responsibility Law. Assuming that nominal GDP decreases 15% for the complete year, and that the net deficit of the Central Government reaches US$ 6,036 million (adding to the previous account the new US$ 300 million loan by the World Bank), the net deficit could reach 11.1% of GDP, above the limit established by the Cortizo Administration in its reformed Law (7.0-7.5% of GDP). This new information about the economy in 2020 makes the need for a credible fiscal consolidation program urgent if the Administration wants to tap the financial markets at similarly low rates as ...