Macro Watch: As one of the fastest growing economies, Panama is emerging as a leading country in Latin America. This growth is enabling the Central American country to rise above other major economies of the region. The Panamanian economy has different sectors that provide injections to the economy. Some key elements that contribute to the economy’s fast rise are the Panama Canal, the Colon Free Trade Zone, tourism, and investment in construction sectors.
Nevertheless, this remarkable growth level could have adverse effects. By having more money flow and, consequently, more buying power, domestic demand will increase rapidly. Due to that, supply may not increase at the same level and, hence, prices would rise. The rising prices of oil and raw materials, plus the pressure generated by the increasing domestic demand, could be translated into a higher inflation rate in Panama.
Currently, the consumer price index (CPI) is growing at annual rates above 6%, which can be seen as an indication of overheating. The region could become more vulnerable to speculative capital movements that may create financial uncertainty. The government will need to continue regulating the financial system stability by attracting more foreign and direct investment to reduce the possibility of breaking the bubble.
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By Rocio Miguel in Hong Kong – CEIC Analyst
Currently, the consumer price index (CPI) is growing at annual rates above 6%, which can be seen as an indication of overheating. The region could become more vulnerable to speculative capital movements that may create financial uncertainty. The government will need to continue regulating the financial system stability by attracting more foreign and direct investment to reduce the possibility of breaking the bubble.
Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription.
By Rocio Miguel in Hong Kong – CEIC Analyst
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