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Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Panama's economy is small, very much open, highly diversified, dollar driven and highly competitive by regional standards. In 2021, the country had an estimated growth in GDP of 12%, mainly driven by the recovery in activity in the Panama Canal, a gradual upturn in tourism, and an increase of investment in infrastructure and transportation, which stimulated employment and boosted private consumption. The Panamanian economy is expected to continue recovering in the coming years, albeit at a slower pace, with the IMF predicting a GDP growth of 5% for both 2022 and 2023.

Public spending remains under pressure, as gross public debt represented 62.2% of GDP in 2021. However, the country has been experiencing ongoing fiscal improvement and economic recovery, so a gradual debt decrease is expected. According to the IMF, the gross government debt is expected to decrease to 61.2% in 2022 and 60.6% in 2023. Fiscal deficit reached 6% of GDP in 2021, and should continue decreasing in 2022 and 2023, reaching 3% and 2.2%, respectively. Although the current account has a structural deficit, it had been declining. In 2021, it represented -3.7% of GDP, a rate that's expected to decrease to -3.5% in 2022 and -3.2% in 2023. The external debt is sustainable, with more than 50% held by the banking system. A sovereign wealth fund and banks' foreign currency assets mitigate liquidity risks. In 2021, inflation remained low at 1.4% and this trend is expected to continue, with inflation rates reaching 2% in 2022 and remaining stable in 2023. The country is known as a tax haven, and has recently improved the banking regulation system, especially transparency and cooperation with the legal authorities. However, the Panama Papers scandal has shown that banking regulation remains insufficient. In addition, the banking sector is highly exposed to the regional slowdown and strength of the USD, which can affect internal consumption and investment. Two economic drivers, namely real estate and construction, could be particularly affected: given the weight of foreign demand in these sectors, there is concern about potential losses for developers in the event of demand falling as we observe an excess of supply in real estate and high-end tourism. To mitigate the impact of the COVID-19 pandemic, the government continued implementing a series of fiscal measures in 2021, which included increased health spending, temporary economic support to vulnerable households; tax relief, benefits, and and a series of tax-related measures - such as an extension of the deadline for the filing and payment of taxes, quicker tax refunds, and the suspension of penalties and interest. Overall, the fiscal measures implemented by the Panamanian government in light of the pandemic have been effective in boosting economic activity, which has been gradually recovering.

According to the IMF, Panama has the 8th highest GDP per capita in Latin America, at around USD 14,640. However, despite remarkable progress made by the authorities in recent years, income inequality is among the highest in the region and poverty has increased as a result of the COVID-19 pandemic, especially within most vulnerable groups. When it comes to children, poverty is much higher than average, as more than half the country's children are poor, and almost a fifth suffer malnutrition. Although unemployment has been rising since 2012, the country experienced a significant decrease of unemployment rates in 2021, due to the Panama's steady recovery following the initial impact of the COVID-19 pandemic. Still, it's worth noting that the informal sector employs more than 40% of the labour force. In 2021, unemployment reached 10.2% of the population, and it should continue decreasing in the coming years, with rates expected to reach 9.2% in 2022 and 8.2% in 2023.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 66.7952.9460.1264.3768.94
GDP (Constant Prices, Annual % Change) 3.0e-17.9e12.05.05.0
GDP per Capita (USD) 15,83112,373e13,86114,64415,481
General Government Balance (in % of GDP) -5.2-6.2-6.0-3.0-2.5
General Government Gross Debt (in % of GDP) 42.266.362.261.260.6
Inflation Rate (%) -0.4-1.6e1.42.02.0
Unemployment Rate (% of the Labour Force) 7.118.510.29.28.9
Current Account (billions USD) -3.331.23e-2.22-2.22-2.25
Current Account (in % of GDP) -5.02.3-3.7-3.5-3.3

Source: IMF – World Economic Outlook Database , October 2021

Note: (e) Estimated Data

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

The economy of Panama is largely dependent on the mining, agriculture, and timber industries. The country has one of the largest copper ore reserves in the world, as well as large reserves of gold, manganese, and iron. Hydropower is also a major natural resource in Panama as it supplies 60% of all electricity in the country. Additionally, 30% of the country's land is devoted to farming, as agriculture is one of the industries that contributes the most to the economy. Overall, agriculture accounts for 2.77% of GDP and employs 14.41% of the labour force - about 80% of all farmers in the country are family farmers. Panama produces mainly bananas and different varieties of vegetables, maize, sugarcane, rice, coffee, watermelons, cocoa beans, pineapples, potatoes, coconuts, soybeans, timber, milk, livestock and shrimp. In 2021, the Panamanian agricultural industry showed a steady recovery from the impacts of the pandemic, as well as hurricane Eta and tropical storm Iota - both of which hit the country in November 2020. Although all of these factors initially reduced Panama's agricultural production, by the end of 2021, Panama saw good harvests, especially of rice, corn, pumpkin, and bananas - all of which increased compared to the previous year, mainly due to good management, technological improvement, and the increase in hectares.

Industry is not very developed and contributes 22.8% of GDP, employing 17.7% of the labour force. 43.6% of Panama land is forest land, so logging is a big industry in the country. The main industrial activities are in agribusinesses, dairy, sugar refining, apparel manufacturing, petroleum products, chemicals, paper and paper products, printing, furniture and building. Given the country's large mineral reserves, mining is the fastest growing industry in Panama. Although the industrial sector wasn't as deeply impacted by COVID-19 as the other two economic sectors, the challenges that were faced by the industry sector in the initial stages of the pandemic were promptly overcome and, in 2021, the Panamanian industry registered a significant growth. The greatest recovery was registered in the manufacturing industry, construction, and the public utility industries of electricity and water.

Panama's economy is pegged to the dollar and the service industry is the biggest in the country, accounting for 70% of Panama’s GDP and employing 67.8% of the workforce. Transport is the most important sector of the service industry, as it comprises the Panama Canal - the government’s chief revenue source. Other well-developed sectors are logistics, banking, the Colón Free Zone (a focal point for foreign investment in the manufacturing industry), insurance, container ports, boat registrations and tourism. Panama is also an important country for off-shore banking services. In 2021, the services sector showed a steady recovery following the pandemic, as the activity in the Panama Canal intensified thanks to the resumption of world trade, and tourism rates increased.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 14.4 17.7 67.9
Value Added (in % of GDP) 2.7 23.6 71.0
Value Added (Annual % Change) 4.1 -32.1 -11.7

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
Panamean Balboa (PAB) - Average Annual Exchange Rate For 1 USD 1.001.001.001.001.00

Source: World Bank - Latest available data.

 

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Foreign Trade

Panama is mainly export oriented and highly dependent on trade, which represents 83.2% of GDP. The country also has the largest trading fleet in the world, with 16% of the global fleet carrying capacity being registered in Panama. The free zone of Colón is the second largest free zone in the world after Hong Kong, demonstrating the country’s openness to foreign trade. Panama mainly exports medicaments (14.6%), oxygen-function amino-compounds (5.6%), sulphonamides (4.5%), electrical apparatus for line telephony (4.3%), and perfumes (3.5%), while its top imports include petroleum oils (8.6%), medicaments (6.7%), motor vehicles (3.9%), oxygen-function amino-compounds (3.4%), and electrical apparatus for line telephony (2.7%). According to IMF Foreign Trade Forecasts, the volume of exports of goods and services decreased by 14.7% in 2020 and is expected to increase by 17.1% in 2021, while the volume of imports of goods and services decreased by 17.4% in 2020 and is expected to increase by 17.6% in 2021.

The country’s partners are the United States, China, Colombia, Singapore, Costa Rica, the Dominican Republic, Venezuela, Mexico, and South Korea. The expansion of the canal has more than doubled its capacity, allowing it to accommodate vessels that were originally too wide with the United States and China being the first users of this vessel type. The country has trade agreements with the United States, Mexico, Peru, Canada, Chile, Singapore, Taiwan, and Israel. Panama is also a member of the "Central American Integration System" (or SICA), a regional institution whose main purpose is to promote integration between Central American countries, fostering security, freedom, democracy, and social development within the region. Additionally, Panama is also one of the countries in the Central America-EFTA agreement, as well as the Central America-EU agreement.

According to the last available data from WTO, Panama imported USD 14.7 million worth of goods and USD 3 million in services in 2020. Over the same period, the country exported USD 9.4 million in goods and USD 8.5 million in services. As a result, when only accounting for goods, Panama had a trade deficit of USD 2.7 million. However, the country registered an overall trade balance (including services) of USD 2.7 million in 2020.

 
Foreign Trade Values 20162017201820192020
Imports of Goods (million USD) 18,71021,93923,00621,49214,740
Exports of Goods (million USD) 10,06011,09311,48011,3189,483
Imports of Services (million USD) 4,4464,6524,8285,0013,009
Exports of Services (million USD) 12,32913,30313,67813,8178,502

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20162017201820192020
Foreign Trade (in % of GDP) 87.487.489.784.2n/a
Trade Balance (million USD) -7,761-8,469-9,207-7,608-2,714
Trade Balance (Including Service) (million USD) -267202-3511,2012,772
Imports of Goods and Services (Annual % Change) -4.84.50.00.0n/a
Exports of Goods and Services (Annual % Change) -4.35.80.00.0n/a
Imports of Goods and Services (in % of GDP) 45.445.647.043.4n/a
Exports of Goods and Services (in % of GDP) 42.041.842.740.7n/a

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20212022 (e)2023 (e)2024 (e)2025 (e)
Volume of exports of goods and services (Annual % change) 15.112.39.57.48.6
Volume of imports of goods and services (Annual % change) 34.20.57.66.17.2

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Panama joined the WTO in 1997. It made a free-exchange agreement with Taiwan (2004), Salvador (2003) and Canada (2009) on the elimination of tariffs in sectors of industry, agriculture, forestry and fishing. The country is currently negotiating with the United States. Panama has also shown interest in negotiating with MERCOSUR and has been invited to join the G3 (which unites Venezuela, Colombia and Mexico). Finally, Panama signed a Free Trade Agreement with Canada.
 

Main Partner Countries

Main Customers
(% of Exports)
2017
United States 20.2%
Colombia 8.9%
Venezuela 4.5%
Chile 3.0%
Peru 2.5%
See More Countries 60.8%
Main Suppliers
(% of Imports)
2017
China 19.8%
United States 18.5%
Singapore 6.9%
Mexico 4.3%
South Korea 2.6%
See More Countries 47.8%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
President: Laurentino "Nito" Cortizio Cohen (since 1 July 2019)
Vice President: José Gabriel Carrizo Jaén (since 1 July 2019)
Next Election Dates
Presidential: May 2024
National Assembly: May 2024
Main Political Parties
Panama's political system is based on a multi-party system where parties work together to form coalition governments. The country's major political parties are:

- Democratic Revolutionary Party (PRD): centre-left, populist, social-democratic
- Democratic Change (CD): centre-right, opposition, works toward continued economic growth and better infrastructure
- Nationalist Republican Liberal Movement (MOLIRENA): centre-right, pro-business, liberal, conservative. Allied with the CD
- Panamenista Party (PP): right-wing, populist, conservative
- People's Party (PP): centre-right, christian democracy, conservative. Formerly known as Christian Democratic Party or PDC
- People's Party of Panama (PPP): left-wing, Communist
- Broad Front for Democracy (FAD): left-wing, socialist, indigenist
- Independent Social Alternative Party (PAIS): right-wing, conservative, evangelical
Executive Power
The president is both the chief of state and head of the government. The president (as well as the vice-president) is elected by popular vote to serve a five-year term, and is not eligible for a consecutive re-election. The president appoints the Cabinet and has executive powers which include implementation of the law within the country and running the day-to-day affairs.
Legislative Power
The legislature in Panama is unicameral. The parliament, called the National Assembly, has 71 seats and its members are elected by popular vote for five-year terms. The legislature is a branch of the power which is equal to and independent of the executive. Legislative power is vested in both the government and the National Assembly.
 

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COVID-19 Country Response

COVID-19 epidemic evolution
To find out about the latest status of the COVID19 pandemic evolution and the most up-to-date statistics on the COVID19 disease in Panama, please visit the Panamanian government platform with the official data. Official information on the progress of the epidemic in Panama is consolidated by the Ministry of Health. The ministry provides a daily epidemiological update, which includes key national figures.

For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.

Sanitary measures
To find out about the latest public health situation in Panama and the current sanitary measures in vigour, please consult the Panamanian government platform on COVID-19 including the up-to-date information on the containment measures put in place and public health recommendations.
Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.

The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions
For the information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the portal of the Panamanian National Customs Authority.

For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Panama on the International Trade Centre's COVID-19 Temporary Trade Measurese wbpage.

Economic recovery plan
For the information on the economic recovery scheme put in place by the Panamanian government to address the impact of the COVID19 pandemic on the Panamanian economy, please visit the website of the Panamanian Ministry of the Economy and Finance. The information on the Panamanian economic emergency plan is available here.

For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and  macroeconomic) taken by the Panamanian government to limit the socio-economic impact of the COVID-19 pandemic,  please consult the section dedicated to Panama in the IMF’s Policy Tracker platform.

Support plan for businesses
For the information on the local business support scheme established by the Panamanian government to help small and  medium-sized companies to deal with the economic impacts of the COVID19 epidemic on their activity, please consult  the portal of the Panamanian Department of Micro, Small and Medium Enterprises.

For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the World Bank's Map of SME-Support Measures in Response to COVID-19.

Support plan for exporters
To find out about the support plan for exporters put in place by the Panamanian government, please consult the Ministry of the Economy and Finance and the Ministry of Commerce and Industry websites. The government is still working on a support plan for exporters, and once a decision is reached, it should be published on the said websites.
 

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