Caribbean & Central America - April 2015 (ISSN 1741-4458)

Eclac lowers growth forecast to 6%: The latest Eclac report predicts that Panama will grow by 6% in 2015, down one percentage point from its previous forecast. Growth in 2014 slowed to 6.2%. According to a report filed by the International Monetary Fund (IMF) on its recent fact-finding mission to the country, the slowdown was due to a slower pace of public investment, continued weaknesses in the Colón Free Zone and delays in the expansion of the Panama Canal. Still, at 6% Panama’s growth is forecast to be the greatest in the region.

Eclac has lowered its forecasts for the region as a whole. Whereas it previously predicted the continent would grow by 2.2%, it now expects overall growth of just 1% for 2015. In a statement to accompany its prediction, Eclac explained that the revision “reflects a global environment characterized by lower than expected growth in late 2014. With the exception of the United States, growth projections have been revised downwards in industrialised countries and emerging economics will continue to slow”.

While growth slowed in Panama in 2014, so too did inflation, to 2.6% as lower oil prices and price controls on certain food items kicked in. For 2015, the IMF is predicting inflation of 1.5%. The current account deficit remained high in 2014, at 11.4% of GDP, owing in part to strong investment-related imports, but this is expected to drop over time as investment projects wind down and exports increase. This deficit is expected to continue to be financed by buoyant foreign direct investment inflows. A new social and fiscal responsibility law is set to limit the government’s capacity to run up a fiscal deficit: for 2015 it is budgeted to be 3.7% of GDP.

Panama metro: Three international consortia have submitted their bids to win the contract to build the second line of the Panama City metro. The bidders are: UTE Panama II (comprised of Spain’s Dragados SA de España, Mexico’s Ingenieros Civiles Asociados and Peru’s Graña y Montero); Consorcio Línea 2 (Brazil’s Constructora Norberto Odebrecht and Spain’s FCC Construcciones) and Consorcio PANAMetro (China Harbour Engineering Company, China Railway First Group and Spain’s Corsan-Corviam Construction). The second Metro line, which will span 21km and comprise 16 stations, is expected to be completed by December 2018.