economy

Decrease in GDP predicted

Indicators suggest that the deacceleration of the U.S. economy has affected Panama’s economic growth, though some said it would not.

The drop in Panama's GDP could be even greater once various construction projects now at their peak are completed.

David Mesa/LA PRENSA

Ups and downs: Economic activity in the construction sector increased during the first quarter of 2008, but Panama’s overall GDP declined because of the troubled U.S. economy.1035963

When the U.S. economy began to slide downhill last year, especially in the real estate and financial sectors, some people thought Panama wouldn't be affected. Recent economic indicators suggest otherwise. The economies of the two countries are connected, and Panama's growth is slowing.

The consulting firm Indesa projects that Panama's gross domestic product (GDP) will grow only 7.7 percent in the first quarter of 2008 , as compared to 10.5 percent for the same period last year, according to figures from the Contraloría General de la República.

Former minister of Economía y Finanzas and Indesa partner Guillermo Chapman says the deacceleration is attributable to a drop in consumption in the U.S., which is reflected in a decrease in the volume of containers shipped through the Panama Canal, and shrinking exports.

Panama's export sector posted a drop in volume of 0.5 percent. Banana exports fell 9.8 percent, other fruits 8.5 percent, coffee 1.2 percent, and beef and cattle 72.9 percent, according to the Contraloría.

Although some other economic activities grew significantly---the total value of new construction, additions and renovation, for example, grew 41.5 percent---there may still be cause for concern about where Panama's economy is heading.

Economist and university professor Rolando Gordón says the construction numbers may fall when various projects now at their apogee are finished. "When that happens, unemployment will go up," he pointed out.