Over the past decade, Panama has been one of the fastest growing economies worldwide. Average annual growth was 7.2 percent between 2001 and 2013, more than double the regional average. The Panamanian economy grew by 6.2 percent in 2014, 5.8 percent in 2015, and for 2016 the forecast is 6.0 percent, rising slightly to 6.1 and 6.2 percent in 2017 and 2018, respectively.
In the medium term, Panama’s growth is likely to remain one of the highest in Latin America, between 6 and 6.5 percent. Public investments should also remain high, with planned construction of the second Metro line and expected additional traffic generated by the expanded Canal. Private investment should also remain strong. Prospects for high growth in the coming years are also supported by emerging opportunities for private sector-led growth in key sectors, such as transport and logistics, mining, financial services, and tourism.
Panama has made significant progress in reducing poverty in recent years. Between 2008 and 2014, a period including the global financial crisis, Panama managed to reduce poverty from 26.2 percent to 18.7 percent, and extreme poverty from 14.5 percent to 10.2 percent. This means that, of a population of about 3.9 million people, an additional 168,000 Panamanians overcame extreme poverty while close to 300,000 got out of poverty during that period.
Despite the gains on poverty reduction, sharp regional disparities remain. Poverty prevails in rural areas, mainly inhabited by indigenous people. While in urban areas extreme poverty is below 4 percent, in rural areas it is about 27 percent.
Moreover, in indigenous territories, known as “comarcas”, poverty is above 70 percent and extreme poverty above 40 percent. Lack of services, particularly access to water and sanitation, and health continues to be a constraint in the comarcas.
Panama is well positioned to continue making progress towards the twin goals, ending extreme poverty and boosting shared prosperity, thanks to both growth prospects and the Government’s renewed attention to inclusion. Yet sustaining growth over the medium to long term will require addressing some structural constraints that may become binding as the country continues developing. A number of priority structural areas, if left unaddressed, could hamper growth in the coming years. They include: infrastructure, education and skills, and the effectiveness of public institutions.
The Administration of President Juan Carlos Varela took office on July 1, 2014. The Government’s 5-year Strategic Development Plan 2015-2019 rests on two pillars of inclusion and competitiveness and includes five themes:
- Enhancing productivity and diversifying growth
- Enhancing quality of life
- Strengthening human capital
- Improving infrastructure, and
- Improving environmental sustainability, including management.
Last Updated: Sep 19, 2016