economy

Tax reform urged

As the New York Stock Exchange continues on its roller coaster ride and fears about the U.S. economy continue to grow, Panama's business leaders are keeping a close eye on the situation, wondering what impact a recession there would have here.

The Dow Jones Industrial Average has dropped more than 2,000 points from its previous 52-week high, and markets around the world have also suffered losses.

Local analysts are not exactly sure if a downturn in the U.S. economy will mean a recession here, but they are unanimous in saying, "if the American market is slowing down, the entire continent is slowing down."

Some experts say that the issue may be a short-term problem, rather than an indicator of problems on the horizon.

The recipe for surviving such a slowdown, according to them, is to have sufficient savings to cushion the blow of a layoff or other financial emergency.

Panama's economy has been growing at an extraordinary rate. While this has meant a drop in unemployment, there has also been an increase in inflation.

While some analysts say the government does not need to take any action in response to the U.S. situation, others are saying immediate action is necessary.

Analyst José Isabel Blandón believes that the first step that should be taken is for the Panamanian government to refinance the public debt. This action would take advantage of falling interest rates in the United States.

He said the next step the government should take is tax breaks for the middle class.

This move, he said, would soften the blow of an economic slowdown by increasing the amount of money that people can spend on goods and services, thus boosting the economy. He said that the economy could get into serious trouble if prices continue to rise but the economy slows down, which is known as stagflation.

This view is shared by other experts interviewed by La Prensa.

"Panama needs tax reform now that we have a minimum fiscal deficit thanks to the strong growth of the economy," said an economist who preferred not to disclose his identity.