Our comprehensive assessment of Panama's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Panama, as well as the latest industry developments that could impact Panama's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Panama before your competitors.
Panama Country Risk
Belize will post slower growth rates over the next decade than over the previous 20 years, underpinned by our expectation that productivity gains will remain limited. Furthermore, the government will be unable to pursue much-needed reforms in infrastructure and education due to a lack of available funding, further dampening Belize's long-term growth prospects.
Belize's current account deficit will remain substantial over the 10-year forecast period due to declining oil production and weakening export growth.
Public debt sustainability will remain precarious over the next several years, as Belize's debt load continues to grow. A rising debt burden, combined with a history of defaults, will drive up financing costs and increase rollover risk in the country.
Panama Country Risk
External Tailwinds Supporting Regional Underperformers
Central American outperformers Costa Rica and Panama are facing a more challenging road ahead in the coming years. As real GDP growth slows in Panama on the back of the end of canal construction, establishing fiscal discipline and ensuring adequate employment will be crucial. Should the country fail to rein in spending in an environment of lower growth, this would likely cool investor enthusiasm toward the country. Similarly, Costa Rica is also facing a challenging fiscal outlook - a situation which is only exacerbated by the fragmented political environment.
In contrast, our economic outlook for most of Central America's underperformers is brightening. Guatemala, Honduras and El Salvador will benefit from stronger US demand for their manufactured goods, rising remittance...
Panama Industry Coverage (12)
BMI View: Central America's agribusiness industry will continue to grow - albeit inconsistently across sectors - through to the end of our forecast period in 2019/20. Along the way, the different sectors of the market will be forced to fight against headwinds that will directly impact output growth across some countries in the region. As a result of rising incomes and growing populations, as well as an improving real GDP outlook for the region, demand will outstrip supply in the livestock and grains sectors...
BMI View: We maintain our view that the Central American autos market in 2016 will continue to be driven by rising private consumption rates due to remittance inflows and a low inflationary environment, but a poor business environment, rising violence and weaker growth in the construction sector will provide headwinds to vehicle sales growth.
|Central America - Fleet Size|
|Historical Data & Forecasts, 2014-2020 (units)|
|e/f = BMI estimate/forecast. Source: National sources, BMI|
Panama Freight Transport
BMI View: Panama has a strategic location benefitting trade between South and North America, making it a key transport hub and ensuring growth of all freight modes. The recent expansion of the canal is giving Panama the opportunity to become an important manufacturing and transport hub, which will also have a positive impact on its economic development in the future. The strengthening of trade links between the Pacific and Atlantic is also having a positive effect on Panama's industrial development, in which transport infrastructure will play an important part.
Panama has one of the fastest growing economies in Latin America, and its current growth will highlight the need and commitment for further investment in its infrastructure. The freight...
BMI View: We forecast an average of 2.1% real growth for the six construction industries of Central America in 2016. The decline from our forecast for 2015 - 4.4% - is mainly due to a steep drop-off in Panama as it concludes expansion of the Panama Canal and a normalisation of a housing boom in Nicaragua. The region will still offer significant opportunities: the transport sector will see strong growth as development funds target regional...
BMI View: Heightened public spending on infrastructure will help to sustain construction industry value, following the completion of the canal expansion, returning the industry to positive growth by 2018. High-value transport projects, including Panama City metro lines 2 and 3 and additional port infrastructure works, will be the major growth drivers in the industry.
Latest Updates And Structural Trends
We maintain our view for the construction industry to contract in 2016 and 2017, following the completion of the USD5.3bn Panama Canal expansion, with real growth of -5.6% and -3.6% respectively.
BMI View: Central America's insurance markets differ significantly in many ways from one another, in terms of scale, development, competition and product composition. Growth rates vary, although most outperform more developed markets despite ongoing structural issues and currency weakness in much of the region. Consolidation would bolster development in many markets, as would innovation in low-cost products, including microinsurance which has a limited presence in Central America.
BMI expects Central American insurance markets to continue to grow rapidly in the coming years. Annual growth rates outside Nicaragua, the region's underperformer, will consistently hit high single-digit rates, with some sectors consistently posting growth rates in excess of 10%. We highlight Costa Rica and El Salvador as markets...
BMI View: Panama's insurance industry is the most well established among the Central America states and benefits from the presence of large domestic and multinational life and non-life providers which bring both capital and expertise to the market. Robust domestic economic growth will support healthy premium growth in the life and non-life sectors, with rising household income rates boosting affordability for a range of basic individual lines while Panama's role as a regional trading and financial hub will continue to support corporate covers.
BMI View: Mining sectors across Central America and the Caribbean will see varying growth prospects in 2020. The region has significant untapped mineral potential, yet a range of business environments and operational challenges will lead to uneven growth.
Pharmaceuticals & Healthcare
Panama Pharmaceuticals & Healthcare
BMI View: Legislative and regulatory improvements to the Central American healthcare system will further strengthen sector coordination, enhancing medical efficiencies and treatments over the long-term. The region's ageing population and dependence on pharmaceutical imports will increase foreign investment appeal as public health provision grows.
Headline Expenditure Projections
Pharmaceuticals: USD3.7bn in 2014 to USD3.9bn in 2015; +4.6%. Our forecast has been maintained since Q115.
Healthcare: USD16.5bn in 2014 to...
Panama Pharmaceuticals & Healthcare
BMI View: The local government's increasing investment in the public healthcare system will significantly improve the population's access to medicines and provide revenue-generating opportunities for pharmaceutical companies. The business-friendly environment and Colon Free Trade Zone will also boost the country's appeals to foreign investors.
Headline Expenditure Projections
Pharmaceuticals: USD670mn in 2015 to USD710mn in 2016; +6.1% in US dollar terms.
Healthcare: USD4.05bn in 2015 to USD4.42bn in 2016; +9.1% in US dollar terms.
BMI View: Number portability will encourage increased competition as four out of eight Central American countries have introduced it already. For further competition to be increased, the progress of this depends on national commitments of these countries. We anticipate slower growth in the mobile sector across the board with Nicaragua offering real potential. Nicaragua offers real growth potential whereas increasing government meddling, as in the case of Guatemala is a worrisome development. Data-driven 3G/4G services have true potential for growth as the large operators are investing heavily into new infrastructure and technologies for such technological uptakes.
Number porting in Panama increased 37.4% in 2014, highlighting that the population is increasingly more willing to take advantage of better available deals as they...
BMI View: The Panamanian government is dedicated to improving the quality of its hydrological resources and its water supply and sanitation services, as well as promoting wider access to services. The country continues to prioritise and incentivise private investment at national and international levels. We believe these conditions present attractive potential opportunities for investment, although these are often hindered by a messy bureaucracy and rampant corruption.
Risks to the sector remain in the form of the widespread conflict with indigenous groups who resent the creation of large modern water infrastructure developments, which can appropriate what they perceive as 'their' water resources. Events such as the March 2014 protest by Silvia Carrera - leader of Panama's indigenous Ngobe-Bugle - who appealed to the Supreme...