President Varela is confident he’ll end his term on a high note — we’d call the 7% forecasted GDP growth for 2019 high too. So, let’s take stock of where Panama is today and the direction we expect the country to be heading in as we look ahead to next year and to the next administration.
The economic horizon
According to the IMF, despite temporarily slowing in 2018, the Panamanian economy is “poised for a rebound in the near term and will remain among the most dynamic in Latin America.” The slowdown shouldn’t be a surprise to most observers, particularly as construction sector stats have revealed over the last few months, falling 40% over the first eight months of the year. The prolonged strikes hit the construction sector hard and delayed some major infrastructure works, including Metro Line 2 and the Tocumen Airport expansion project. Add to the mix that new vehicle sales, a good barometer of consumers’ appetite and expectations, also didn’t expand, and FDI was down more broadly, and you might think there are underlying problems.
So, why is the IMF so bullish on Panama’s economy? Because they believe the slowdown is temporary.
Here’s why taking the longer term view is right.
Can tourism really be a panacea?
For starters, the Amador Convention Center (the largest in Central America), set to open in December 2018, is poised to dramatically boost tourism, as trade-shows and events draw millions of new visitors to Panama and position Panama City as a destination for the meetings, incentives, conferences and exhibitions (MICE) industry.
Add to the mix the first new state-of-the-art Boeing 737 MAX9, which just landed on COPA’s runways (with the rest of the order on its way), new connections to Beijing and Europe, and the government’s plans to lower visa barriers on certain nations, and travel to Panama should be easier (and more fun) for a lot more visitors. By investing in its fleet, COPA alone projects that within the next decade it’ll be flying in an additional 10 million visitors a year.
To make it all happen (and run on time), the government is also upgrading Panama City’s Tocumen International Airport, which will be inaugurated by the end of 2019. By 2022, it’ll be able to accommodate 18 million passengers a year, up from 5.8 million today.
The works are all part of the Master Plan for Sustainable Tourism Development 2007-2020, and, if you take all of these developments together, it shows a diversified tourism strategy that really can be a magic bullet for growth. The Tourism Promotion Fund has set it all in stone for the long run.
More infrastructure in the works
Panama’s first ever metro line, which opened its doors in 2014, was a victim of its own success. As the #1 entity in public satisfaction across the country, no wonder that there’s tremendous pressure to bring the metro to every corner of the city — and fast.
Line 3 of the metro will serve the 400,000 commuters from the western suburbs and will be another major works project that will keep unemployment low for the next decade. Not to mention the new construction that’ll spring up in those newly connected neighborhoods — they’ll be the new commuter cities of the future.
Projects like Line 3, the fourth bridge over the Canal and the completion of the Panama Canal expansion are all government projects that, combined with new port expansions and the public/private alliance to renovate Colon will keep Panama’s economy cranking for at least another 10 years.
Looking ahead to 2019
Panama’s government has shown time and again that it’s committed to enhancing the country’s attractiveness to businesses, tourists, and investors. Those pro-growth policies were responsible for ushering in an era of sustained economic growth, transforming Panama into one of Latin America’s foremost services and logistics hubs.
So, one thing is for sure: although the May 2019 election will be closely contested by the three major parties, regardless of the outcome, the next president won’t be changing course on these pro-growth policies. They really are set in stone to ensure Panama’s competitive advantage as an attractive destination for everyone.