Panama has made significant progress in reducing poverty in recent years. Between 2007 and 2012, a period including the global financial crisis and recession, Panama managed to reduce poverty from 39.9 percent to 26.2 percent, and extreme poverty from 15.6 percent to 11.3 percent. This means that, of a population of about 3.6 million people, an additional 150,000 Panamanians overcame extreme poverty while close to half a million citizens got out of poverty during that period.
Poverty reduction in Panama was greater than the Latin American and Caribbean average. The rise in the middle class, seen in many countries in the region, was particularly marked in Panama and there has been an overall decline in inequality.
A key factor in this remarkable poverty reduction has been economic growth. 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 an estimated 6.2 percent in 2014 and will grow an estimated 6.2 percent in 2015.
Looking ahead, there are good reasons to expect that growth will continue to be strong in Panama (around 6 percent) in the near future. Even if public investment will be lower in the coming years after the completion of major infrastructure projects such as the Canal expansion and the first Metro line; the planned construction of a second Metro line is underway and the expanded Canal will generate additional traffic. In addition, there is no indication of a downturn in private investment and Panama continues to be an attractive country for foreign direct investments. The prospects of sustained high growth are also supported by emerging opportunities in transport and logistics, mining, financial services, and tourism.
Despite the gains on the poverty front, challenges remain. Poverty in Panama is a rural and indigenous territories phenomenon. While in urban areas extreme poverty is below 4 percent, in rural areas it is about 27 percent. Moreover, in the Indigenous Peoples’ territories, the comarcas, poverty is above 70 percent and extreme poverty above 40 percent. Despite strong and fairly inclusive growth at the national level, differing rates of poverty reduction have led to the poor becoming more concentrated in specific geographic areas. Lack of services, particularly access to water and sanitation, continues to be a constraint in the comarcas.
Over the long term, certain structural areas require attention to ensure that Panama continues a strong and inclusive growth: infrastructure, particularly energy, education and labor skills, and public sector institutions.
A new Administration took office on July 1, 2014, with President Juan Carlos Varela running on an anticorruption platform of restoring credibility to the country’s institutions and improving the efficiency of Government. The Varela Administration has also committed to upgrading quality of life through better access to services and expanding economic opportunities for the poor.
Last Updated: Aug 18, 2015