Panamanian Economy Faces Challenges Despite Flare-up

Panama ought to cope with more economic reforms, skyrocketing unemployment and bulkier shortfalls regardless of good outcomes in such fields as transportation, tourism and the building industry, the International Monetary Fund (IMF) disclosed in a recent report.

On May 2002, Panamanian authorities passed a fiscal responsibility legislation with a view to slash public debt by half of the nation´s gross domestic product (GDP). So far, the country has managed to make a gradual dent in its once heavy deficit.

The IMF Annual Report on Panama -pieced together by the Moody´s Investors Service earlier this year- points out that the Central American country will be bound to further cut down on its capital spending in coming years due to the shortage of economic reforms.

Yet, Moody´s Investors note that Panama is favored by a nonstop incoming cash flow that gives it a stability edge over other Latin American nations that lack a mighty service sector like Panama´s, that accounts for nearly 80 percent of Panama´s GDP.

Revenues reaped by the Panama Canal, coupled with the existence of an international banking system and the region´s largest tax-exempt free trade zone for re-exports point to an increasingly heftier GDP.

The IMF has admitted that Panama´s trade agreements, including one recently signed with Taiwan, are key elements in fostering foreign investment.