Despite its status of middle-income country in terms of GDP, Panama still remains a society of sharp contrasts. The robust economic growth of today is a historic opportunity for progress in reducing poverty and inequality. Read More »
Panama’s economic growth has been one of the fastest in Latin America over the past decade, with real gross domestic product (GDP) expansion averaging over 8% from 2006 to 2012.
Compared to other countries in the region, Panama did relatively well during the global financial crisis with a 3.2% growth in 2009. However, in 2010 the economy resumed its growth rate with an increase of 7.6%, and growing 10.6% in 2011, 10% in 2012 and an estimate of 7.5% this year.
This strong economic growth has had an impact in some social indicators. The poverty rate fell from 48.5% in 2002 to 27% in 2011, while extreme poverty decreased from 21% to 11% over the same period.
Yet inequality remains relatively high in Panama (Gini coefficient of 0.53 in 2011) and challenges persist in the public provision of social services. For example, children in indigenous communities still have significantly less access to basic services such as education, electricity and sanitation than children in rural or urban areas. Addressing these challenges would be critical for Panama to converge towards the most advanced countries in terms of shared prosperity.
The Panama Canal expansion and a number of mega-projects have boosted the economy which it is expected to continue growing steadily. This represents an historic opportunity to make progress in reducing poverty and inequality.
Developing a more effective and pro-poor social protection system will be crucial to accelerating poverty reduction in Panama. In order to broaden the base of potential beneficiaries, the country needs to further increase private sector competitiveness and improve access to education and health. In addition, greater focus on developing skills and stimulating innovation will be needed.
To address these challenges, Panama has introduced various programs to reduce poverty and increase access to services. The Red de Oportunidades conditional cash transfer program, for instance, provides US$50 to the poorest mothers so that their children can go to school and receive basic health and nutrition services.
The Government of Panama has also committed additional resources to social protection programs, such as “100 a los 70” that provides US$100 for retirees 70 years or older not covered by pension programs and the “Beca Universal” program that grants an annual US$180 scholarship to students enrolled in public schools as well as eligible students in eligible private schools.
This Country Partnership Strategy is characterized by a results oriented approach and is built around three pillars aimed to support Panama in confronting its development challenges:
Economic growth that builds on the country’s competitive advantages,
Providing greater opportunities for all, and
Transparent and efficient public sector that provides returns to society.
The third pillar is cross-cutting and helps support growth and provide for a more efficient and effective public sector.
In total, the World Bank’s portfolio in Panama includes nine projects focused on health, social protection, rural development, environment, infrastructure and efficiency in the public sector, for US$402.4 million. Another project financed by a US$6 million grant for rural productivity and environmental conservation complements these investment transactions. Active projects include:
The Health Equity and Performance Improvement Project, which aims to increase access of rural communities to quality basic health services for improving maternal and child health. So far, more than 200,000 people in rural areas have received health services from this project.
The objective of the Water Supply and Sanitation in Low-Income Communities Project is to increase access to sustainable water supply and sanitation services for communities in rural and poor urban areas. To date, access to water supply and sanitation services has been improved for more than 20,000 beneficiaries in rural communities.
The Government launched the Red de Oportunidades conditional cash transfer program in 2006 and the World Bank provided financial backing for the initiative through the Social Protection Project, which covered around 11% of the population and exceeded the original target of 60,000 poor households with children. A series of Development Policy Loans have also helped to improve and strengthen the Red de Oportunidades program and other social protection programs.
The Rural Productivity Project supplied US$39.4 million to conserve globally important biodiversity and protected forest, mountain, coastal and marine ecosystems in Panama. More than 36,000 hectares of forest are protected and nearly 3,000 small producers are involved in partnerships financed by the project. Another result from this operation was progress in the reform of land administration: half the country was photographed, 51,876 parcels were surveyed and 12,422 titles were issued in the provinces of Chiriquí, Veraguas, and Bocas del Toro.
Also, the World Bank provided additional financing to two key projects– Basic Education (US$5.4 million) and Public Policy Reform Technical Assistance Project ($6 million) – to scale-up activities and enhance their impact. In education, the preschool coverage of 4-5 year-old children increased from 31% in 2001 to 61% in 2007, while the enrollment of these children increased from 55,369 to 92,900 in the same period. During 2000-2007, net enrolment in secondary school also increased from 58.5% to 64.6%.
A recent study by the World Bank yielded a development strategy to maximize the long-term social and economic potential of the “reverted areas”, covering almost 580 square miles between the Atlantic and Pacific oceans. The Strategy for the Enhancement of the Reverted Areas evaluated development options for these lands, to attract more investments and generate more jobs without overlooking environment impact.