Standard & Poor’s Reaffirms Panama’s Investment Grade in BBB

Standard & Poor’s Reaffirms Panama’s Investment Grade in BBB
According to the rating agency, the economy remains diversified and resilient.

The risk rating agency Standard & Poor’s (S&P) reaffirmed Panama’s sovereign rating at BBB, maintaining the country’s investment grade, while the outlook changed from stable to negative, basically due to the impact of the pandemic on the economy.

S&P expects the Panamanian economy to recover in 2021, growing 9%, supported by mining exports and increased private consumption as mobility restrictions ease and vaccination efforts continue. In addition, they expect growth in the medium term to return to its potential of 6%, as public and private investments pick up.

In addition, the risk rating agency highlights that key infrastructure projects, such as the construction of Metro Line 3, along with a tunnel under the Canal, the extension of Metro Lines 1 and 2, a new hospital, energy transmission projects and road improvements, should support the momentum of growth and employment in the coming years.

The Government expects public-private partnerships (PPPs) to become more relevant, following the recent implementation of the APP legal framework, starting with a large road maintenance program of 2,000 kilometers.

Finally, S&P indicates that Panama has improved its debt profile in recent years to mitigate the risk of refinancing. The average maturity of debt is just under 13 years and 80.5% of debt is at a fixed rate. In addition, the weighted average cost was 3.9% in December 2020, and the limited amount of short-term debt (Treasury Bills), along with a mostly stable maturity profile through 2024, contains the refinancing risk.

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