Panama Sovereign Credit Ratings Raised: S&P

S&P has raised Panama to BB+ (stable) from BB based on a booming economy and continued improvement in fiscal indicators. The government expects a surplus of about 0.7% of GDP for 2007 versus a deficit of 5.6% in 2004. Net general government debt should drop to 33% of GDP in 2007 from 42% in 2004, adds S&P. “Maintaining a near-balance fiscal position during the expansion of the Panama Canal is critical,” says S&P analyst Roberto Sifon Arevalo. He adds that a US slowdown would undermine growth in 2008. “We expect activities related to the canal expansion, the construction boom, and further growth of port facilities to support real GDP growth of 6.5% in 2008,” says Sifon Arevalo. The canal and its expansion continue to be the main economic drivers in Panama, but there has been growing diversification in recent years. “This will be of particular importance in 2008, as fiscal spending pressures are expected to increase due to both normal pre-electoral dynamics and increasing inflationary pressures,” S&P concludes.