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Moody's has revised its outlook on Panama's Baa3 foreign currency sovereign bond rating to positive from stable, on the back of solid economic growth, prudent macroeconomic management and a fast growing but healthy financial sector.
"Panama continues to be one of the fastest growing and diversified countries in the Baa rated category," the ratings agency said in a statement. "GDP growth averaged 8.4% between 2005 and 2010, and we expect it will grow 7.5% in 2011 and 6.5% in 2012."
"Its economic resiliency is well anchored by growing traffic through the Panama Canal, activity in the Colon Free Trade Zone, a highly profitable financial system and a burgeoning tourism sector, with no single sector contributing more than 9% of GDP," Moody's added.
According to the agency, Panama's credit indicators show no symptoms of overheating. Lending growth is advancing at sustainable monthly rates of around 15% year-on-year, the lending portfolio remains well diversified and the non-performing loan ratio is falling.
A potential upgrade on Panama's sovereign debt rating should increase foreign investment in both the offshore and retail sectors of the country's banking system. State-run financial institutions, such as Banco Nacional de Panamá, are likely to see their ratings follow the trajectory of the sovereign.