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For basic facts about Panamanian economy, please click here.
Introduction
Panama has one of the healthiest macro economies in Latin America.
Our population is approximately 3.12 million inhabitants and growing at a rate of 1.5% annually.
In 2003 our GDP was US$ 12,182.8 million, and it grew at 4.2%, which is significant compared with the rest of Latin America, where growth averaged 2.5%. Real GDP growth was 6.4 % in 2005.
The Panamanian economy is based on a well-developed service sector, mainly in the areas of international trade, business services, transportation and finance. The service sector accounts for 79.4% of our gross domestic product, generates 30.3% of our exports, and employs 64.3% of the Panamanian workforce. The industrial and manufacturing sectors account for 12.1% of the economy, while agriculture represents around 8.5%.
We have implemented an export-oriented development model based on a competitive social market economy, where the government acts as facilitator and regulator, eliminating distortions and providing incentives for private foreign investment. Indeed, a dramatic change has taken place in the direction and structure of our economy in the last 10 years.
To this effect, the government and the private sector are working closely to improve the efficiency and competitiveness of the Panamanian economy, thus increasing the level of employment.
Below are the main concrete results Panama has achieved under this program:
- Tariff reductions from an average of 37% to 9.05%, one of the lowest in the region.
- Modernization of the public and private financial sectors.
- Legislation to make labor more flexible, thus enhancing competitiveness at the international level.
- Privatizations of a number of public services.
- Massive improvement in road infrastructure.
- Modernization of education.
- Increased foreign investment.
Panama has become one of the countries with the lowest tariff barriers and freest economies in the world. In 2006 the Index of Economic Freedom, which is computed annually by the Wall Street Journal/Heritage Foundation, ranked Panama fourth in Latin American region.
Other country indicators
Source: Ministry of Economy and Finance, Republic of Panama
Inter-American Development Bank
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As a result of the transfer of the Panama Canal to the Republic of Panama in 1999, and its consequent insertion in our economy, a significant growth has been seen from 2001. GDP in 2005 is more than twice than GDP in 1995. |
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From 2003, a rise in the external income from the Panama Canal, the port companies and the Colon Free Zone prompted a recovery after a stagnation period through 1999 – 2003. The growth in 2005 was more than expected, arising from a new growth platform based in dynamic internal factors, as well as investors’ confidence. Fiscal and Social Security Systems reforms that took place in 2005 affected the economy’s growth due to a strike which froze the country for one month. It still managed to grow at 6.4％ during 2005.
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After the transfer of the Panama Canal, Panama became a middle income country with a per capita GDP of US$ 4,318 in 2005. |
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Panama generally has enjoyed low inflation below 1.5%, however it has increased to 2.9% in 2005, due to:
- Worldwide petroleum price swells which rise electric power and fuel costs.
- Problems in food supply, due to phytosanitary and climatic reason.
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Foreign trade has maintained the momentum experienced since the transfer of the Panama Canal in 1999. There has been a rise in exports of non-traditional agricultural goods and a large growth of main international services such as the Panama Canal, Colon Free Zone, International Banking Center, as well as Tourism.
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