Highly-respected analyst, Moody’s Investor Service has upgraded the investment rating for Panama, citing the country’s stable environment and “robust” economic growth.
Technically, Panama’s rating for bonds and other securities has been raised to Baa1 from Baa2, Moody’s announced Friday. The new rating reflects Moody’s belief that “Panama’s economic growth and fiscal metrics exceed that of most Baa-rated peers and prospects remain more favorable over the medium term,” the service said.
The key factor is Panama’s continued economic growth. “In Moody’s view, Panama’s growth outlook over the coming years will remain robust,” the firm said in a statement. Moody’s predicts the country’s GDP will grow at more than 5 percent through 2022.
Several elements are locked in to drive growth, according to Moody’s analysis. Large-scale infrastructure projects will “sustain the contribution of gross fixed capital formation… while continued development along the Panama Canal zone related to logistics will solidify Panama’s role as a regional trade and financial hub, further supporting growth,” the firm says.
Moody’s also cited several signs of stability in Panama’s government infrastructure. The government debt burden is expected to stabilize at or below 40 percent of GDP through 2020, which is better than many of its peers. Elections in 2019 shouldn’t impact the trend, with any new government expected to continue to reduce the deficit “in line with targets set in the fiscal responsibility law,” Moody’s says.
Panama’s government moved in recent years to strengthen its fiscal policy framework, which also played a role in Moody’s decision. The stable outlook reflects Moody’s expectation that debt ratios will remain stable over the coming years as the government complies with the new fiscal rules, the report says.
Moody’s expects economic growth will “remain supportive of Panama’s credit profile and that it will be stronger than that of peers,” the company’s report says. “Domestic factors, related to continued investment and the expansion of the mining sector, will provide the basis for this strong growth.”