Moody's revises sovereign outlook to positive in boon to financial sector

- Friday, August 5, 2011

Moody's revises sovereign outlook to positive in boon to financial sector

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.

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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.