Caribbean & Central America - October 2009 (ISSN 1741-4458)

In the second quarter of 2009 the economy grew by 1.9% year-on-year. This was, almost certainly, the best performance in the region, though it is a far cry from the 11% GDP growth registered in 2008. The only major economic sector to contract in the second quarter was banking services. This suggests that the banking sector has been affected by the problems affecting the global financial system. Manufacturing also contracted in the second quarter. In the first half of 2009, the economy grew 2.4% year-on-year. This in an impressive performance given the fact that export activities such as the production of fresh fruit for foreign markets; the Zona Libre de Colón, air traffic and the use of the Panama Canal all contracted. The latest monthly economic activity figure (Imae) suggests that the economy is now contracting very slightly. The Imae for June showed a fall of 0.05%. Such a slight dip suggests that the economy will power away again in 2010.  Most international economists are bullish on Panama, suggesting that the expansion of the Canal will keep the economy growing strongly. The consensus is for real annual GDP growth of 6% between 2010 and 2014.

Inflation: In the year to August consumer price inflation was only 1.8%. The consensus forecast for inflation over the next five years is that it will average 2.5%.