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, 10.5% in 2012, 7.9% in 2013 and an estimate of 7.3% in 2014.
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. This program currently benefits more than 357,000 people.
The Government of Panama has also committed additional resources to social protection programs, such as “120 a los 70” that provides US$120 to more than 100,000 retirees over 70 years of age who are not covered by pension programs and the “Beca Universal” program that grants a monthly scholarship of US$20 to 550,000 students in public and eligible private schools.