Panama Government announced that fiscal deficit was by only 1% in 2009

Panama Government announced yesterday (on February 11st 2010) that the fiscal deficit of Non Financial Public Sector (NFPS) was by only 1% of GDP in 2009. Government achieved to down the NFPS deficit from 2.3% (US$575.2 million) from January to September to 1% (US$253.3 million) from January to December. Government explained that collected almost US$200 million plus due to“ley de moratoria” (a fiscal law that allow to pay taxes without penalty by delay), which allowed to down the NFPS deficit to 1%. Government fiscal performance was better than Panama Economy Insight forecasted; Panama Economy Insight forecasted the NFPS deficit by 2.3%, but this was by only 1% due to “ley de moratoria”.

Government sector value added expanded by 3.1% in the first three quarters of 2009, according to GDP data published by the Comptroller on its website. Meanwhile, the revenues of the Central Government contracted by 8.6%, year on year, according to data published by Ministry of Economy and Finance on its website. The previous Government, which concluded its mandate at the end of June, prepared the 2009 budget based on an economic growth of 7%, which was too optimistic with regard to the true situation. At that time, global economic downturn effects were not very clear and International Monetary Fund predicted a growth of 7% for Panama.

Panama Economy Insight estimates that public debt as percentage of GDP increased from 45% in 2008 to 46.7% in 2009, as a result of NFPS deficit, as well as also due to debt of the Financial Stimulus Programme (a financial stimulus for banks). By 2010, Panama Economy Insight forecasts that the NFPS will experience another deficit by 2.1%, because economic growth of just 2.3%. This deficit would fall to less than one percentage point of GDP in 2011 and 2012 and debt as percentage of GDP will reduce to 38.9% of GDP in 2012 because rapid economic expansion.