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Boston, MA -- (SBWire) -- 10/15/2013 --After a robust double digit expansion of 10.7% in 2012, we forecast 7.8% real GDP growth in 2013 and 7.0% in 2014, due to slowdowns in the commercial and transportation sectors in the face of weaker Venezuelan and Colombian re-export activity. Panama's economic activity index readings have thus far reflected our view, averaging 6.8% year-on-year (y-o-y) through the first five months of 2013.

Uneven infrastructure development and difficult weather conditions may also act as an obstacle to investment in Panama's less-developed regions. Indeed, while we have seen substantial development in the province of Panama, other regions have received less attention. Even in neighbouring Cocle, which has seen a building boom in recent years, infrastructure development has not been sufficient to meet demand, which is a knock to the country's freight industry.

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After Panama's current account shortfall shrunk dramatically in 2012, we forecast the coming years will see a modest pickup in nominal terms, though a further narrowing of the deficit-to-GDP ratio. The country's services trade surpluses are likely to remain sizeable. Not only do we expect Panama to continue benefitting from growing tourism revenue, but canal-related inflows are also likely to keep services exports strong.

Indeed, our Freight & Shipping team has highlighted that throughput will remain robust and sees potential for a further uptick in tolls (see 'Canal To Support Freight Transport Sector', February 28).

Annual tonnage throughput for the ports of Balboa and Manzanillo is set to remain healthy this year (at 7.06% and 5.09% respectively), while the Panamanian air freight sector will see a slight decrease in y-o-y growth terms to just over 6% in 2013, down from 2012's 6.69%.

Headline Industry Developments

- 2013 air freight tonnage is set to grow by 6.01% in 2013, to 130,300 tonnes.
- 2013 tonnage throughput at Balboa is expected to grow by 7.06% to reach 27.29mn tonnes.
- 2013 tonnage throughput at Manzanillo is forecast to grow by 5.09% to reach 14.61mn tonnes.

Latest Developments

CHEC Wins US$66mn Contract To Expand CCT - Chinese company China Harbour Engineering Company (CHEC) put pen to paper to a US$66mn contract relating to the expansion of Evergreen's Colon Container Terminal (CCT) in Panama, it was reported in early August 2013. The expansion work includes the building of 347m of additional quay and an 8.5-hectare-container yard. The construction work is scheduled for completion in 23 months. The expansion project will increase the CCT's capacity to 1.5mn twenty-foot equivalent units.

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