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New Market Report Now Available: Panama Freight Transport Report Q1 2014

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2013-12-29 17:25:57 - Fast Market Research recommends "Panama Freight Transport Report Q1 2014" from Business Monitor International, now available

Following a notable slowdown in real GDP growth in H113 and signs that economic activity will remain relatively moderate in the coming months, we are downgrading our 2013 real GDP growth forecast for Panama to 7.6%, from 7.8% previously. This revision is underpinned by our view that weakness in the commercial sector will persist in the coming months, as well as our Infrastructure and Freight Transport teams' forecasts for slightly slower growth in construction and throughput respectively in 2013.

Our long-held view for a slowdown in Panama's robust growth story continues to play out, with Q213 real GDP growth coming in at 7.6% year-on-year (y-o-y), only moderately stronger than the 7.0% y-o-y recorded in the first three months of the year.

Moreover, with the monthly economic activity indicator increasingly showing erratic growth, and a deceleration in the commercial sector likely to continue weighing on growth in H213, we are downgrading our 2013 real GDP growth forecast to well below consensus estimates of 8.3%. Meanwhile, we maintain our 2014 real GDP growth forecast at 7.0%.

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We anticipate that the commercial sector (14.4% of real GDP in 2012) will continue to provide little support to headline growth in the coming months, due in part to relatively weak import demand from Venezuela, which is an important destination for exports from Panama's Colon Free Trade Zone (CFTZ), following the devaluation of the Venezuelan bolivar in February. We have seen this play out in recent months, as commercial sector activity contracted by 0.4% y-o-y in real terms in H113.

Moreover, local media reports indicate that the CFTZ is owed approximately US$1.2bn in debts from Venezuela, as importers have had significant issues accessing US dollars in recent months. Despite modestly revising up our 2013 real GDP growth forecast for Venezuela to 2.0% (see 'Slower Growth As Monetary Conditions Tighten', August 27 2013), we anticipate that high inflation and a weak currency will continue to dampen import demand, while dollar shortages will remain a hindrance for importers.

Headline Industry Developments

* 2014 air freight tonnage is set to grow by 5.68% in 2014, to 137,600 tonnes.
* 2014 tonnage throughput at Balboa is expected to grow by 7.11% to reach 29.24mn tonnes.
* 2014 tonnage throughput at Manzanillo is forecast to grow by 15.23% to reach 20.21mn tonnes.

Latest Developments

ACP And Japanese Car Sector Hold Meetings: The Japanese Shipowners' Association and car manufacturers met with the Panama Canal Authority (ACP) in Japan in September 2013 as part of talks concerning the Panama Canal's expansion programme and planned revised toll structure. During the meeting, the ACP gave an analysis of the impact of the revised toll structure on the car carrier segment. The ACP also updated the vehicle carrier segment about the progress of the US$5.3bn expansion programme.

Panama 'Best In Latin America' For Sea Trade, UNCTAD Says: In September 2013, Panama was named the best country connected for sea trade in Latin America by the 10th edition of the Maritime Connectivity Index prepared by the UN Conference on Trade and Development (UNCTAD), reported Sea Trade Global. Five components were assessed by UNCTAD, including the number of companies providing services to and from the country's ports, and the size of large vessels providing services. Panama beat Mexico, Brazil, Colombia, Chile and Peru to gain the top spot.

Panama Canal Expansion Behind Schedule: The expansion of the Panama Canal is around six months behind schedule, Reuters reported in September 2013. According to the report, over the next few months it will become clearer whether the project will meet its October 2014 deadline. The US$5.3bn project, which may face delays due to concrete works, will allow bigger vessels to pass through the lock gates. The authorities plan to implement fines of up to US$54mn should the project not be completed by the deadline, and will award US$50mn if the work is completed within the stipulated date. Cargo traffic passing through the canal is expected to be around 330mn tonnes in 2013.

Risks To Outlook

In terms of upside risk, the expansion of the Panama Canal may permit 88% of the global liquefied natural gas (LNG) vessel fleet to pass through by 2015. This would save a significant amount of time and money for LNG buyers and producers. Currently, the canal can accommodate only 8.6% of the world's existing LNG fleet. The expansion work at the canal also includes the building of two sets of locks, as well as the widening and deepening of existing navigational channels. However, vessels wider than 49 metres, such as Qatar-Max and Qatar-Flex sized ships, will still not be able to pass through the canal.

In line with our relatively positive outlook on Panama's economy, the World Economic Forum rates the country as the second most competitive in Latin America (behind Chile) in its 2013-2014 Global Competitiveness Report. The organisation cited the country's ability to consolidate its position as a transport hub, as well as its growing financial markets, improving technology, and increasing education as part of its rationale. Given our view that the growth spurt provided by the Panama Canal expansion project will fade in the coming years, continued structural improvements will be key to bolstering the country's long-term growth prospects.

About Business Monitor International

Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports. View more research from Business Monitor International at

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