finance

Economy growing despite oil prices

Panama’s first quarter growth was more than 8 percent despite the fact that oil prices have continued to increase.

Economists say that the country is now more energy efficient and its economy is insulated against high energy prices.

Bloomberg

market woes:Despite rising oil costs, the economy has grown.1046053

Despite soaring energy costs and economic woes in the United States, Panama's economy seems to be keeping up its unprecedented period of growth.

In 2007, the average price of a barrel of crude oil topped $60, but Panama's economy grew more than 11 percent. That growth has continued even though a barrel of oil is nor more than $130. Panama's economy grew by an estimated 8.2 percent in the first quarter of this year.

Panama imports all of its oil and depends on it to generate 40 percent of its electricity. But rising energy prices have not had the impact that they have had in the past.

That's because Panama's infrastructure has become much more efficient, economists said. According to the consulting firm Indesa, Panama consumed 7,000 barrels of oil for every $1 million of gross domestic product (GDP) in 1980. In 2006, the ratio had dropped to 2,000 barrels of oil for every $1 million of GDP.

Another reason that oil prices have not had a significant impact on the economy is that Panama is a service-related economy, instead of a production-related one, said Rolando Gordón, an economics professor at the Universidad de Panamá.

Two of the main pillars of the economy are the Panama Canal and international finance, which are not as impacted by the price of oil as, for example, a factory would be. This means that increases in the cost of oil have less of a direct effect on the country’s economic growth.