Thursday 28th February, 2008

 

Panama’s credit rating raised by Standard & Poor’s

 
 
 
 
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Panama’s sovereign credit rating was raised to one level below investment grade by Standard & Poor’s as the country posts record economic growth and reduces debt.

The increase to BB+ from BB made the Central American nation’s rating equal to those of Brazil and Peru. Panama’s outlook is stable, while its short-term rating of B was also affirmed, New York-based S&P said in a statement.

Panama’s economy, which has averaged growth of 6.5 per cent since 2002, likely expanded ten per cent last year on increased revenue from the canal, which remains the main driver of growth, S&P said.

The slowdown of the global economy will cut Panama’s pace of growth to 6.5 per cent in 2008, S&P said. Panama is rated Ba1 by Moody’s Investors Service and BB+ by Fitch Ratings.

“While it’s good news for the credit, it’s not unexpected,” said Claudia Calich, who manages US$1 billion in emerging-market debt for Invesco Inc in New York. The ratings increase now “puts all three agencies on the same level.”

The government’s debt probably dropped to 33 per cent of gross domestic product last year from 42 per cent in 2004. Panama has US$8.27 billion of debt, according to S&P data.

Panama will post a record surplus of 0.7 per cent of GDP for 2007 after a deficit of 5.6 per cent in 2004, S&P said.

Tourism, construction and international financial institutions are helping to diversify Panama’s economy, according to the credit rating company.

The expansion of the canal won’t hurt the government’s finances as long as it remains on budget, S&P said.

 

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