PANAMA economic outlook remains stable before expected administation change.

Economy
In his opinion, the solid performance of the banks will offset the sharp drop in economic growth, the political noise prior to the presidential elections, as well as the weakening of consumer and business confidence.

Moody’s Ratings maintains its outlook for Panama’s banking system at “Baa3 stable”.

In his opinion, this rating reflects the solid performance that the banks will compensate for the sharp decline in economic growth, the political noise prior to the presidential elections, as well as the weakening of consumer and business confidence.

“The economic slowdown will affect the recovery of portfolio quality, but banks’ lower appetite for risk and strong capitalization will help contain risks,” the rating agency said in its report.

Moody’s also expects interest income to fall due to low business volume expected over the next 12 months, and high rates will keep financing costs elevated, hurting profits.

“Adjustments to provisions for credit losses in a weakened economy will also affect the bottom line in 2024,” he estimated.

It projected that deposits will continue to represent the primary source of funding and the slowdown in loan originations will limit reliance on higher-cost market funds.

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