Front Matter

Front Matter Page

IMF Country Report No. 19/12

PANAMA

SELECTED ISSUES

January 2019

This paper on Panama was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on November 26, 2018.

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Front Matter Page

PANAMA

SELECTED ISSUES

November 21, 2018

Approved by:

Western Hemisphere Department

Prepared by Alejandro Santos, Kimberly Beaton, Metodij Hadzi-Vaskov, and Joel Okwuokei

Contents

  • IS THERE A MIDDLE-INCOME TRAP? SINGULAR GROWTH PATTERNS IN PANAMA

  • A. Introduction

  • B. Growth Performance

  • C. Middle-Income Trap

  • D. Evidence from Past Episodes

  • E. Sustainability of Panama’s Growth

  • F. Concluding Remarks

  • FIGURES

  • 1. Growth Performance (1960–90)

  • 2. Growth Performance (1990–2015)

  • 3. Middle-Income Trap

  • 4. Exit from the Middle-Income Trap

  • 5. Evidence from Growth Episodes

  • 6. Growth Accounting

  • FINANCIAL INTEGRITY IN PANAMA

  • A. Introduction

  • B. Overview of Financial and Corporate Services Sectors

  • C. Illicit Proceeds and Vulnerability to Money Laundering and Terrorist Financing

  • D. Compliance with Global AML/CFT and Tax Transparency Standards

  • E. Critical Areas for Further Reform

  • F. Priority Actions and Way Forward

  • G. Concluding Remarks

  • FIGURES

  • 1. OFC Portfolio Investment Liabilities

  • 2. Cocaine Trafficking Routes in Panama

  • 3. Global Cocaine Trafficking Flows

  • TABLES

  • 1. Structure of the Financial System

  • 2. Technical Compliance with FATF Recommendations, 2018

  • PANAMA: GROWTH AT RISK

  • A. Introduction

  • B. Financial Conditions in Panama

  • C. Growth and Financial Conditions

  • D. Conclusions

  • FIGURES

  • 1. FCIs for the Subdimensions of Financial Risk and Variable Loadings

  • 2. Coefficients from Quantile Regressions of Financial Conditions on Future GDP Growth

  • TABLE

  • 1. Financial Variables by Dimension of Financial Risk

  • INTERCONNECTIONS WITHIN PANAMA’S REGIONAL BANKING SECTOR AND WITH FOREIGN BANKS

  • A. Introduction

  • B. Interbank Exposures in the Panamanian Banking System

  • C. Spillovers from Stress in International Banks

  • D. Conclusions

  • FIGURES

  • 1. Panamanian Bank Performance by Bank License Type

  • 2. Total Capital Losses and Number of Defaults

  • 3. Capital Losses as a Function of Original Defaulting Bank

  • 4. Total Capital Losses and Number of Defaults Excluding Capital from

  • 5. Capital Losses as a Function of Original Defaulting Bank Excluding

  • TABLES

  • 1. Interbank Deposits by Type of Bank License

  • 2. Investment Holdings of Banks by Type of Bank License

  • 3. Panamanian Bank’s Downstream and Upstream Exposures to Foreign Banking

  • 4. Spillovers to Panama from Upstream Exposures to Foreign Banks

  • ANNEX

  • I. Bank’s Interbank Exposures by Origin and Destination Bank

  • II. Heatmaps of Banks’ Financial Performance

  • III. Contagion Analysis – Capital Losses by License Type

  • ASSET QUALITY AND ECONOMIC ACTIVITY

  • A. Introduction

  • B. Taking Stock of Panamanian Banks’ Asset Quality

  • C. Macro-Financial Implications of Asset Quality

  • D. Conclusions

  • FIGURES

  • 1. Asset Quality of Panamanian Banks

  • 2. NPLs, Bank Profitability, Credit and Economic Activity

  • 3. Macrofinancial Linkages in Panama

  • TABLES

  • 1. Contemporaneous and Lagged Correlations Across Macro-Financial Variables

  • 2. Variance Decomposition

  • ANNEX

  • I. Impact of Credit Growth Shock

  • II. Impact of Real GDP Growth Shock

Panama: Selected Issues
Author: International Monetary Fund. Western Hemisphere Dept.