Moody’s Raises Panama Outlook

Moody’s has revised the outlook on Panama’s Baa3 debt rating to positive from stable. “The Panamanian economy has continued to show remarkable and enduring dynamism, and is well positioned to grow at rates above its potential thanks to the expansion of the Panama Canal and the government’s ambitious efforts to improve and modernize the country’s infrastructure,” the agency says. The government has also kept a solid balance sheet, despite recent fiscal deterioration, and favorable debt dynamics. Future growth is supported by the $5.25bn Canal expansion and the government’s $13.5bn 5-year strategic plan to improve Panama’s domestic infrastructure and turn the country into a global logistical hub and major tourist destination. While the public debt stock is expected to continue rising in nominal terms, strong growth should see the debt burden fall to around 40% of GDP by 2012. Panama’s financing needs remain relatively small thanks to its moderate fiscal deficits. An upgrade would be likely, Moody’s says, if the government agenda continues without large deficits, and manages Canal windfall prudently.