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Panama Canal Expansion Fuels 7% Growth in First Quarter

June 14 (Bloomberg) -- Panama’s economy expanded 7 percent in the first quarter from a year earlier, the slowest pace in about three years, as construction projects and expansion of the Panama Canal drive growth.

Economic growth slowed from 10 percent in the last three months of 2012, the national statistics institute said today in a statement. The Central American nation is forecast to grow 7.8 percent this year, according to the median estimate of seven economists surveyed by Bloomberg.

Having registered the fastest growth in Latin America for the past two years, it’s only “natural” that Panama’s $33 billion economy expands at a slower pace, though still among the highest in the region, said Carl Ross, managing director at brokerage Oppenheimer & Co. in Atlanta.

“I don’t see much getting in the way of Panama right now,” Ross said in a phone interview from New York. “The canal expansion is full steam ahead, the infrastructure projects are full steam ahead.”

Fitch Ratings affirmed the nation’s dollar bonds last month at BBB, citing high public investment that is likely to “safeguard the economy from external shocks and the electoral cycle over the next two years.”

Growth is expected to average 8 percent and drop to 6 percent when the $5.25 billion canal expansion is completed in 2015, Fitch said in a May 22 report. Fueled by the expansion project, foreign direct investment climbed 10 percent last year from a year earlier to $3 billion, the United Nations reported.

Panama joined Central American neighbors Honduras, Costa Rica and Guatemala in selling global bonds this year, offering $750 million of 40-year debt on May 22.

To contact the reporter on this story: Eric Sabo in Panama City at esabo1@bloomberg.net

To contact the editors responsible for this story: Bill Faries at wfaries@bloomberg.net; Andre Soliani at asoliani@bloomberg.net

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