The rating actions follow the affirmation of Panama’s IDR at ‘BBB-‘ and the revision of its Rating Outlook to Stable from Negative.

The revision of Panama’s Outlook to Stable reflects the ongoing improvement in the fiscal position and a better-than-expected economic recovery following the initial pandemic shock. Fitch’s fiscal expectations have improved amid a stronger-than-expected 2021 outturn and economic recovery, and improved confidence in the authorities’ capacity to successfully narrow the fiscal deficit via revenue-based measures and expenditure restraint.

Fitch projects these developments will be sufficient to place debt/GDP on a very gradual downward path. Fitch expects the government will comply with the revised Fiscal Responsibility Law deficit target in 2022, but compliance could prove increasingly challenging in later years. Sustained deficit reduction would enable faster progress in reducing debt/GDP.  More…