The recession continues, but the September opening of the economy may help in 4Q; the MEF goes to the market successfully

PANAMA - Report 30 Sep 2020 by Marco Fernandez and Alex Diamond

The figures through July show double-digit decreases in real activity in all sectors with the exception of the Canal and seaports. Central Government revenues (taxes and non-taxes) are following the same pattern. The MEF issued debt for US$ 2.575 million: (1) a re-tap of the 2060 bond for US$ 1 billion (at a yield of 3.28%); (2) a new bond (Panama 32) for US$ 1.25 billion (at 2.25%); and (3) the re-tap of medium-term notes (or Pannotas 2026) for US$ 325 million (at 2.75%). The high demand for the issues reflects confidence in the future of public sector finances, but it is also the consequence of abundant liquidity in the international markets.

The Bank Superintendency published the new regulations on credit losses: 3% of total loan portfolios across the board is the percentage that banks must assign as provisions in 2020; half will pass through profit and losses, and the other half could affect capital. According to official sources, all the institutions in the system will comply with the minimum regulatory capital requirement, although a number of banks could show losses.

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