IMF Report Sees Panama In Recovery

by Mike Godfrey, Tax-News.com, Washington

30 March 2004

On March 22, 2004, the Executive Board of the International Monetary Fund (IMF) concluded its Article IV consultation with Panama, which found that the economy grew a healthy 4% in real terms last year following two years of weak growth.

The IMF observed that the nation’s banking system, which underwent “some stress” in 2002 amid turbulent South American financial markets, also began to recover in 2003. This has been evidenced by growth in private sector and banking deposits in the latter half of last year, noted the report.

According to the IMF, the fundamentals of the nation’s banking system remain “sound”, and there was a sharp increase in the banks’ profitability last year with the ratio of non-performing loans decreasing somewhat to less than 3% as of the end of September 2003.

The report also stated that Panama’s financial authorities have taken steps to reach full compliance with the Basel Core Principles.

The IMF envisages that last year’s economic growth will be sustained into 2004, driven by the construction sector, which continues to take advantage of tax breaks set to expire at the end of this year.

Free Trade Agreements, such as the recent accord with Taiwan, will also help to benefit the Panamanian economy by encouraging foreign investment into the nation’s financial and communications systems, the report added.

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