PANAMA CITY, Panama

PANAMA’S economy will grow by as much as seven per cent this year, thanks in large part to revenue from its signature inter-oceanic canal, officials said Monday.

The Central American nation’s coffers get an annual injection of about US$1 billion every year from the canal, according to the Economy Ministry which said that the revenue helps buoy the local economy.

Officials said they expect growth of between 6.5 per cent and seven per cent for 2014.

Foreign investors also have been betting on Panama and its canal, investing US$15 billion over the past five years alone, the ministry said.

The small nation — population 3.8 million — chalked up 8.4 per cent growth in 2013.

Completing the widening of the waterway — a massive project which is a year behind schedule and has been mired in controversy — tops new President Juan Carlos Varela’s agenda.

The vast construction project was to have been completed this year, but delays and cost overruns have pushed back the schedule to early 2016.

The 80-kilometre- (50-mile) long canal was completed by US interests in 1914 to provide a much shorter, safer route between the Atlantic and Pacific.

Work to expand it was interrupted earlier this year over a dispute about who would pay for an estimated US$1.6 billion in cost overruns. It was also hit by a strike by workers demanding higher wages.

Stakes are high for the project, with five per cent of the world’s maritime trade already passing through the canal. The expanded waterway will be able to process 12,000 container ships in its first year of use — triple the current capacity.

The International Monetary Fund is forecasting an average growth of 2.5 per cent for Latin America and the Caribbean this year.

— AFP