March 16 2007
Ba1/BBThis week, the International Monetary Fund (IMF) released its Public Information Notice for theArticle IV consultations with Panama which concluded last month. The assessment was quitepositive as the Fund applauded the work the Panamanian authorities have done for their soundmacroeconomic management, which have produced an average real GDP growth of 7.2% in the2004–06 period, coupled with low levels of inflation (albeit high oil prices) and a decliningunemployment rate.
The Fund’s staff supported the governance given so far to the Panama Canalexpansion project and welcomed the safeguards and monitoring put in place to avoid thedevelopment of economic imbalances. Specifically, the IMF praised the authorities’ intention tomonitor expenditures and borrowing strategies. Regarding the all-important public-debt-to-GDPratio, which is currently around 63%, the staff suggested to the Panamanian authorities to anchortheir medium-term to long-term economic policies with a target fiscal deficit of 1% of GDP after2009. With this target and the expected high levels of economic growth rates, the debt-to-GDP ratiowill likely trend downward and become better aligned with average BB-rated credits. The Fund alsorecommended that such a criterion should be part of the Fiscal Responsibility Law currently underpreparation. In other news, Alejandro Ferrer, Panama’s Minister of Commerce, stated on Thursdaythat Panama is working towards having the free-trade agreement with the United States signed onJune of this year. Negotiations concluded last December, and currently Panamanian authorities arelobbying to get the agreement approved by the U.S. Congress. We reiterate our underperformrecommendation on Panama based on valuations. (CR/FU/EM)
Credit Suisse
The Fund’s staff supported the governance given so far to the Panama Canalexpansion project and welcomed the safeguards and monitoring put in place to avoid thedevelopment of economic imbalances. Specifically, the IMF praised the authorities’ intention tomonitor expenditures and borrowing strategies. Regarding the all-important public-debt-to-GDPratio, which is currently around 63%, the staff suggested to the Panamanian authorities to anchortheir medium-term to long-term economic policies with a target fiscal deficit of 1% of GDP after2009. With this target and the expected high levels of economic growth rates, the debt-to-GDP ratiowill likely trend downward and become better aligned with average BB-rated credits. The Fund alsorecommended that such a criterion should be part of the Fiscal Responsibility Law currently underpreparation. In other news, Alejandro Ferrer, Panama’s Minister of Commerce, stated on Thursdaythat Panama is working towards having the free-trade agreement with the United States signed onJune of this year. Negotiations concluded last December, and currently Panamanian authorities arelobbying to get the agreement approved by the U.S. Congress. We reiterate our underperformrecommendation on Panama based on valuations. (CR/FU/EM)
Credit Suisse
No comments:
Post a Comment