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Panama Economic Review Of 2009

By Will Irvine


You would be very hard pressed to find anyone to say that 2009 was a wonderful year most specially in terms of economy.  The most optimistic term it a difficult year and it was this way at all levels from countries, to companies, to individuals it was a chain reaction from the devastating economic crisis of late 2008.  In Latin America, Panama is one of the few success stories with a registered growth for 2009 of 2%.  While this is very low for the growth of GDP in previous years it is still positive growth which is a huge feat comparing it to countries with negative growth percentages.  According to Panama´s National Institute for Statistics and Census since 2004 the Panamanian economy has been showing a very strong growth trend with 7.5% growth in 2004, 7.2% in 2005, 8.5% in 2006, 12.1% in 2007 and 10.7% in 2008 after which it started to show signs of deaccelaration with 3.0% growth in the first quarter of 2009, 2.2% in the second quarter and 1.1% in the third quarter.  
You may wonder why Panama in spite of everything still managed to show positive growth trends for 2009?  Most Panamanian experts, such as Mr. Guillermo Chapman from the consulting firm INDESA, agree that the infrastructure projects, internal consumption, the banking industry and the construction industry were the pillars which kept the economy afloat in this period.  In terms of the construction industry the projects already announced and sold in 2008 were continued and banks did provide financing for the projects which allowed the cement and material industry to keep producing at full capacity and kept labor employed both of which have an effect on internal consumption as the is cash on the street and in people´s hands.  
Mr. Chapman indicates that another factor in Panama´s positive growth is the income derived from consumption of permanent and occasional visitors to the country.  Government statistics indicate that the entry into the country of passengers residing abroad increased by 7.8%, passengers in direct transit and crewmembers increased by 17.1% while tourists decreased 2.1%. 
Mr. Otto Wolfschoon of Globalbank has high praise for the Panamanian banking system which, unsophisticated in comparison to those of developed countries, stood firm with a legal liquidity percentage of 69.17% at the end of November 2009, a growth in total assets of 2.0% versus 2008 with total assets of $64 billion.  Therefore establishing itself as a solid and stable industry at an international level.  Mr. Wolfschoon credits this stability to very prudent risk management and conservative policies which keep high levels of liquidity throughout the entire system. 
In spite of its conservative bent the Panamanian banking system was flexible enough to go through with credits for the construction sector helping it cushion the blow expected from the real estate slowdown and keeping the confidence of investors by completing project financing even in very risky economic times. 
According to Mr. Wolfschoon 2010 should bring even more growth in assets for the banking sector corresponding to overall economic growth projected for Panama.  In terms of credit policies may be softened slightly and banks will be inclined to take more risks however still well within the conservative spectrum. 
Sources: La Prensa Suplement Martes Financiero dated 12/22/09 and La Prensa

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