IMF: Panama will Grow 6% in 2019

In the words of the International Monetary Fund (IMF), the Central American country’s economy is projected to remain among the most dynamic on the continent, as the outlook remains positive.

From the IMF statement:

On December 12, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Panama.

Despite slowing in 2018, Panama is expected to remain among the most dynamic economies in the region with strong fundamentals. Growth is estimated at 3.7 percent in the first half of 2018 (compared to 5.4 percent a year ago), reflecting a sharp deceleration in key sectors including construction, which was affected by a prolonged strike in April/May. The unemployment rate increased marginally to 5.8 percent in March 2018 from a year ago, reflecting less dynamic activity. Inflation remains subdued at 0.8 percent (year on year) in September 2018, (compared to 0.5 percent in December 2017) despite supply shocks that have increased food and fuel prices. The overall deficit of the Non-Financial Public Sector (NFPS) reached 1.6 percent of GDP in the first half of 2018 (compared to deficit of 0.2 percent of GDP in the first semester of 2017), due to accelerated budget execution to support the economic weakening. The external current account deficit stood at 8.0 percent of GDP in 2017, as a significant increase in oil imports (fueled by higher international oil prices) was offset by strong service exports, driven partly by additional revenue from the expanded Panama Canal. Credit growth has decelerated as financial conditions have started to tighten.

The outlook remains positive, albeit set against heightened downside risks. Growth is projected at 4.3 percent in 2018, but to rebound to 6.3 percent in 2019 supported by the opening of a large mine (Minera Panamá) and a recovery in construction, and subsequently converge to its potential of 5½ percent over the medium term. Inflation is expected to average about 2 percent. The external current account deficit, mostly covered by FDI, is expected to reach 9 percent of GDP in 2019 and gradually decline to about 5½ percent of GDP over the medium term. Fiscal policy is expected to remain guided by the amended Fiscal Responsibility Law (FRL). The overall NFPS deficit is projected to increase to 2 percent of GDP in 2018–19 and gradually fall to 1½ percent of GDP over the medium-term, keeping public debt sustainable and below the FRL indicative of target of 40 percent of GDP. Key risks relate to setbacks in implementing the remaining Financial Action Task Force (FATF) recommendations and making continued progress on tax transparency, continued oversupply in the domestic property markets, delays in completing the large mining project (following the recent Supreme Court ruling which creates uncertainty about some elements of the contract), political uncertainty ahead of the upcoming elections; a sharper-than-expected tightening of global financial conditions, and rising trade protectionism.

Executive Directors commended Panama’s impressive growth performance and noted that macroeconomic fundamentals remain solid, with growth set for a rebound in the near term. Directors considered that, while the outlook remains positive, the balance of risks is tilted to the downside. Against this background, they called for sustained policy efforts to strengthen the AML/CFT framework and enhance tax transparency to preserve Panama’s competitive advantage as a regional financial center. They also recommended measures to enhance financial sector resilience and reforms to facilitate continued robust and inclusive growth.

Directors welcomed the recent good progress on technical compliance with FATF standards, bringing Panama on par with its peers, while underscoring the importance of effective implementation of the Anti Money Laundering/Combatting the Financing of Terrorism (AML/CFT) framework. In this context, they encouraged the authorities to continue strengthening supervisory capacity for AML/CFT oversight, including through risk–based approaches, and further addressing AML/CFT risks to which Panama is exposed. Directors emphasized the need to promptly address the remaining shortcomings in the AML/CFT framework, including making tax crimes a predicate offense to money laundering and ensuring the availability of timely and accurate beneficial ownership information of entities incorporated in Panama. In addition, the authorities should advance the implementation of tax transparency initiatives to ensure a successful Global Forum assessment against enhanced standards.

Directors were encouraged by the authorities’ continued commitment to a prudent fiscal stance and agreed on the importance of preserving the track record of fiscal discipline to keep the public debt‑to‑GDP ratio on a downward trajectory. They concurred that the revised deficit ceilings provide the budgetary space to accommodate additional capital spending, given the softening activity this year, but recommended a gradual withdrawal of the stimulus in the near term as growth gathers pace. Directors also saw scope for raising tax revenue through improvements in revenue administration to support key social expenditures. They welcomed modifications to the social fiscal responsibility law, which simplified and enhanced the transparency of the fiscal rule; and noted the approval of a law to establish a fiscal council, which further bolsters the fiscal framework.

Directors noted the stability of the financial system and the continued progress in financial sector reforms, including the alignment of prudential regulations with Basel III. They urged the authorities to strengthen risk‑based supervision and reiterated the importance of putting in place robust frameworks for crisis management and bank resolution. In addition, Directors recommended measures to further strengthen macro‑prudential policies and systemic risk oversight, including through improved inter‑agency coordination.

Directors called for a reinforcement of the structural reform agenda to sustain high potential growth, while also reducing inequality. They agreed on the need to sustain productivity growth through reforms to improve skills and education quality, attract talent, and further improve the investment climate. Strengthening social policies to continue reducing poverty, improve income distribution, and ensure inclusive growth over the medium‑term were also encouraged.

Source CentralAmerica

The Latest on the Tourism Recovery From the British Virgin Islands

After the destruction of Hurricanes Irma and Maria, the British Virgin Islands’ tourism industry had made serious headway recovering. Since losing over 90 percent of its accommodations and attractions last fall, the territory expects to have 75 percent of its marine berths and 37 percent of its land accommodations reopened by the end of 2018, with many of these returning with upgrades.

Hotels

Scrub Island Resort, Spa & Marina began offering partial rooms and suites in early October and expects to open up its entire inventory by the end of December. The resort has introduced six new villas and plans to unveil another three in early December.

Oil Nut Bay will begin offering one-bedroom Bay Suites this December. Elsewhere at the resort, a new 93-slip marina village and helipad will help facilitate travel between the property and neighboring islands.

Richard Branson’s Necker Island has reopened. The private island’s ‘Great House’ returned expanded from nine rooms to 11. The resort’s ‘Bali High’ complex has been rebuilt with an extended pool and outdoor lounge. The property also added private plunge pools to each individual house.

Several other resorts throughout the British Virgin Islands have already reopened. Anegada Beach Clubreturned earlier this year with new glamping accommodations. Guana Island began welcoming guests again in August and recently reopened its organic farm with the addition of three more greenhouses. The 24-room Sugar Mill Hotel fully reopened December 1 with a new beach restaurant and bar, Tramonti.

Additionally, other resorts have made plans to reopen after 2018 ends. Rosewood Little Dix Bay, a luxury resort on Virgin Gorda, expects to reopen in late 2019. Bitter End Yacht Club will open its marina in spring 2019 and its resort in early 2020.

Cruises

By the end of 2018, the British Virgin Islands expect to have 3,200 berths available. Tortola Pier Park has been renovated and opened for business. The territory expects over 200 port calls and 400,000 passengers in the 2018/2019 season.

In early September, Disney Cruise Line made its return to the territory. Norwegian Cruise Line followed in October. On December 19, Celebrity Cruises’ new Celebrity Edge will dock at Tortola for its inaugural voyage.

Airlines and Ferries

The islands have already regained full airlift and ferry capacity. Taddy Bay Airport in Virgin Goda reopened on November 2 and interCaribbean Airways has expanded service between San Juan and Tortola. The Auguste George Airport on Anegada is also reopened and anticipating expanded flights from Puerto Rico and the U.S. Virgin Islands.

The Anegada Express Ferry now transports visitors between Tortola and Anegada every day. The new Sensations Ferries and Water Taxi runs between Road Town, Tortola and Virgin Gorda. New Horizon’s ferry service, which sails between West End Tortola and Great Harbor Jost Van Dyke, introduced a new multi-deck, air-conditioned ferry with beach access.

Source Travel Agent Central

Netherlands Ponders New Aviation Tax

The two-month consultation launched on Offshore NewsJuly 5, explores several options for an air transport tax, including national taxes based on either aircraft or departing passengers. The consultation also examines the possibility of an EU-level aviation tax.

Under the Government’s proposals, a national per-passenger tax would be imposed at a rate of EUR3.80 (USD4.46) for flights within the EU, and EUR22 for intercontinental flights. This would raise an estimated EUR200m in revenue, the Government said.

The consultation follows up on a commitment in the governing coalition agreement for a new environmental tax on the aviation sector. According to the Government, revenue from the tax would be used to reduce other taxes on individuals and businesses, and to fund environmental protection initiatives.

The Government intends to draw up a draft bill on its preferred option and begin legislative proceedings for the introduction of a new aviation tax later this year.

 

Source: Tax News.

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