economy

CPI jump raises inflation concerns

High inflation is expected to hurt pensioners and the poor.

The consumer price index (CPI), which is the main indicator of inflation in Panama, rose 9.6 percent in July as compared to a year ago, the Contraloría General de la República reported yesterday. Inflation rates that are close to double digits have not been recorded in Panama for at least the past 27 years, according to official records. The rise in the last 12 months was driven mainly by increases in fuel and transport (16.3 percent) and food and beverages (15.3 percent). Adolfo Quintero, former president of the Colegio Nacional de Economistas, estimated that the annual CPI could double this year as compared to 2007, to close at 9.7 percent. Other economists have predicted an increase closer to 6.5 percent, but either way the issue is becoming very troubling for the government and consumers.

“This level of inflation presents serious social problems for a population that is not accustomed to these rates, especially for the poor and pensioners,” said consultant Guillermo Chapman, of the firm Indesa. “It also could present negative political repercussions.”

Economists at the World Bank estimate that the average rate of global inflation will be 3.4 percent this year, and 7 percent in Central America.

Panama, which historically has been recognized as one of the countries with the lowest inflation on the planet, could overcome both averages in 2008. “The momentum that drives the economy will continue to provide excellent opportunities, however, inflation and possible measures that could obstruct the free market economy can create uncertainty and mistrust,” said financier Domingo Latorraca.