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International agency Fitch ratings have put its stamp of approval on Panama’s economic recovery. In its latest report, Fitch upgraded its ratings on Panama to “stable,” noting the quicker than expected bounce back from the pandemic and the overall strength of the economy.

“The revision of Panama’s outlook to stable reflects the ongoing improvement in the fiscal position and a better-than-expected economic recovery following the initial pandemic shock,” Fitch wrote.

The Fitch rating expresses the firm’s confidence in the economy and has far-ranging implications for the country. The rating will make borrowing money easier and provide a third-party assessment to guide investors.

Panama should be able to successfully narrow its fiscal deficit via revenue-based measures and expenditure restraint, which will help long-term groups, the Fitch analysis concludes. The government is expected to resume capital expenditure on infrastructure projects as it shows pandemic expenditures. At the same time, government revenues will benefit from higher transfers from the Panama Canal and the new tax agreement with the First Quantum mining company, Fitch concludes.  

Fitch predicts Panama’s GDP growth for 2021, after a dismal 2020, will reach 15% when fully reported, followed by a robust 7% in 2022 and 5% in 2023. While growth may be slowed by small infrastructure expenditures, Panama’s “diverse economy will help mitigate any risk of an unextended slowdown, Fitch says.

The pandemic continues to pose a risk, but Panama is better positioned than many countries, with 81.4% of the eligible population vaccinated and 90.5% having received at least one dose.

“Panama’s ratings are supported by its high per capita income, the fruit of a track record of strong macroeconomic performance featuring high average growth rates and relatively low inflation, exploiting a strategic location and asset (the Panama Canal),” Fitch writes.