S&P affirms Panama ratings

Standard & Poor's said it affirmed its BB long-term foreign and local and its B short-term foreign currency sovereign credit ratings on the Republic of Panama.

The outlook on the ratings remains negative (in place since March 10, 2003), reflecting the possibility of a downgrade should high fiscal deficits persist during 2004-2005.

S&P noted that Martín Torrijos of the Partido Revolucionario Democrático (PRD) will become president of Panama in September 2004 after winning 47% of the votes in the May 2 election. The president-electis expected to pursue various reforms, including that of the social security system (CSS). Deterioration in CSS has contributed to higher fiscal deficits in recent years, and large fiscal imbalances are incompatible with the framework of Panama's dollarized economy.

The depth and breadth of the president-elect's reform program is unclear, as are other specific measures his administration might implement to reduce the deficit, S&P said.

The ratings on the Republic of Panama are supported by a stable political environment since General Manuel Noriega's dictatorship (1985-1989) ended; and long-standing monetary stability anchored by use of the U.S. dollar.

The ratings are constrained by growing fiscal imbalances that limit policy flexibility and are incompatible with the framework of Panama's dollarized economy, moderate trend growth and foreign direct investment absent reform, and the dual economic structure that limits domestic demand.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.