With trade open and the Tocumen airport, an important regional hub, reactivated, Panama seeks to rise from the crisis after seven months of paralysis due to the pandemic amidst stumbling blocks such as low domestic demand and uncertainty about global recovery.
This country of 4.2 million inhabitants, with an economy dependent on services, completed on Monday a reactivation schedule initiated in September and developed with reserves in view of the fear of a resurgence of the covid-19.
The government has highlighted that more than 75,000 work contracts have been reactivated - out of the more than 270,000 suspended due to the closure of the economy in March - and highlighted the importance of the reopening of Tocumen, “one of the most important assets of the State and one of the greatest attractions of the country”.
But the official forecasts for this 2020 are catastrophic: a collapse of the gross domestic product (GDP) of 9% (analysts raise it to more than 13%), unemployment of 25% and informality of 55%, rates that before the crisis were at 7.1% and 45%, respectively.
By 2021 the growth will be 4%, according to the calculations of Laurentino Cortizo’s government, which took office in July 2019 and since then has issued 8.375 billion dollars of public debt, of which 5.075 billion dollars were issued after the outbreak of the pandemic.
LOW DOMESTIC CONSUMPTION
The startup after the closure of the economy to curb COVID-19, which has left more than 122,000 infected and more than 2,500 dead, is being “slow, because demand is weak since people have no money,” economist Rolando Gordon told EFE.
“As long as there are more than 200,000 workers in the formal economy with suspended contracts, the informal economy does not move and the loans that are being given through the banking system (to reactivate businesses) are at a snail’s pace because of the demands they make, the economy is not going to take off,” the professor added.
This expert thinks, like many in Panama, that the aid of $100 per month given by the government to those most affected by the crisis is insufficient and that this is one of the causes of the lack of circulation in the streets to promote consumption.
DIFFICULT AND EXPENSIVE CREDIT FOR RECOVERY
The fact that loans for micro, small and medium enterprises (Mipyme), which generate 70% of jobs in Panama, are difficult and expensive is another element that slows down the recovery, said Gordon, something that the president of the Union of Industrialists of Panama (SIP), Aldo Mangravita, agreed on.
“The government has promised help and economic support, where is it? It’s not just openness, it’s the help they owe us to the companies that have passed the moor of arbitrary closures. The requirements for loans are exaggerated. The economic pandemic that the government has created is going to kill the companies,” Mangravita told Efe.
In view of this generalized complaint, the Minister of Commerce and Industry, Ramón Martínez, reiterated this week that the Government has destined 150 million dollars to help the Mipyme, money that the banks should distribute “as a cornerstone in this situation”.
But until now the pandemic “has been carried by private enterprise and national industry. The worker with a suspended contract is from the private company,” emphasized Mangravita, who recalled that “all the public officials are working,” without there having been any adjustment of expenses or reduction of wages for any position.
THE UNCERTAINTY OF THE INTERNATIONAL ECONOMY
But beyond an improvement in the domestic economy, which is very small, Panama depends on the external sector because it is a service exporter, which adds a burden of uncertainty, said Gordon.
The problem, he explained, “is what happens with the United States, China, South America, Asia, which use the Panama Canal, the railroad, all the optical fiber we have, the commercial aviation system. If that doesn’t go up internationally, the economy is not going to go up either, we depend a lot on the international economy”.
The International Monetary Fund (IMF) warned this Tuesday that the crisis resulting from the new coronavirus “is far from over”, spoke of an “uncertain hill” to overcome it, and readjusted to -4.4% global fall this 2020 and 5.2% growth for 2021.