Recent headlines in the international press proclaimed that Panama’s economic growth was slowing, after the latest government data showed Panama’s economy had grown at the slowest rate in four years during the first quarter.
But the headlines only told part of the story, and it’s important for anyone interested in investing in Panama City property to understand the real trends. Unlike many property markets, which rely heavily on speculators and real estate promotions, Panama’s property market is supported by real economic growth, which continues to bring more multi-national corporations to the city.
Panama’s economy still grew 5.8 percent in the first quarter, which is a remarkable figure, considering the state of the global economy. True, the growth rate was slower than the 7.6 percent reported in the same quarter of 2013, but that was on the edge of an incredible growth period.
Outside of China, few countries can compare to Panama’s economic growth in the wake of the global economic recession. In 2012, when most countries were still struggling Panama’s economy grew by 10.2 percent. In contrast, the U.S. economy grew by 2.8 percent in 2012 and continues to struggle, despite a 3.4 percent increase in the second half of 2014, according to the International Monetary Fund.
Even among emerging markets, Panama’s growth has been extraordinary. The overall Latin American and Caribbean region’s economy is expected to grow by only 2.5 percent in 2014, while Brazil will only see an increase of 1.8 percent, according to IMF forecasts.
Most importantly, the GDP data in Panama is fueled by real projects, which are going to create long-term industry. The headliner is, of course, the $5.2 billion expansion of the Panama Canal, which is scheduled for completion in 2015. But many international pundits overlook the $6 billion copper mining operation in west Panama under development by First Quantum Minerals, a Canadian company. The growth of the mining industry could rival the Canal’s long term effect on Panama’s economy – and Panama’s real estate market. The development of the mining industry will grow the economy and bring more companies and jobs relocating to Panama City for years to come.
The latest economic data was affected by several factors that don’t reflect the long-term health of the economy. Several large projects completed, including the first phase of the Panama City metro, the first metro in Latin America, which opened a few weeks ago. Economists also say the data was impacted by a drop in trade through Panama’s free trade zone, due to a lingering dispute between Venezuela and Colombia.
At its heart, the Panama growth story remains unchanged. The government is still predicting the economy will ultimately end 2014 up 7 percent from 2013, compared to the IMF forecast of 3.6 percent growth for the global economy. Growth may be slowing, but the train is still racing forward.
Duncan McGowan is president of Punta Pacifica Realty, a Panama real estate agency focused on Punta Pacifica, the exclusive neighborhood of 18 towers perched on the edge of the Pacific Ocean.