1887

Economic Survey of Latin America and the Caribbean 1988

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In 1988, the economic crisis of Latin America and the Caribbean took a dramatic turn. For the first time since the 1981-1983 recession, the per capita product declined to a level equivalent to that of 1978; inflation almost quadrupled to an unprecedented average of 760%, and real incomes declined in most of the countries.

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Panama

Panama underwent a crisis of unprecedented proportions during 1988 which had a negative impact on virtually every aspect of the country's economic and social life. The per capita product fell by 19%, investment decreased by 60%, urban unemployment reached 21%, fiscal income dropped by 45%, the external debt was not serviced, capital flight became a problem, and dislocations were produced in the country's domestic and international financial systems. Even the few quantifiable aspects of Panama's economic performance which were positive were largely illusory: the current account showed a surplus of US$ 600 million, but this was due to the 20% reduction in imports caused by the marked deterioration in the country's external credit standing, and although prices generally remained stable, they did so within the context of a downturn in demand, lower wages and a sharp contraction in liquidity.

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