After a Gross Domestic Product (GDP) contraction of 17.9 percent in 2020, Panama is projected to have a strong rebound in 2021 helped by increased mining output, and new public investments such as the extension of metro Line 2 and construction of Line 3. The rebound, coupled with support to vulnerable segments of the population through mitigation policies, is expected to reduce poverty in the post-pandemic period.
Panama experienced the highest number of COVID-19 cases per 100,000 inhabitants in Latin America with significant consequences on its GDP for 2020, as the economy relies on sectors severely affected by the pandemic such as air transportation, tourism, and construction. Poverty increased by two percentage points, while public debt shot up by almost 20 percentage points of GDP. Panama is facing the challenge of reigniting growth and poverty reduction while balancing its fiscal accounts.
The concentration of jobs in the most affected sectors of the economy makes households particularly susceptible to the crisis. Despite recent growth, workers in the high-growth sectors remained vulnerable, with over one-fifth of them living under $13 a day in 2018 (in terms of Purchasing Power Parity - PPP). In addition, inequality remained among the highest in the world (as indicated by a Gini coefficient of 49.8 in 2019).
Unemployment reached 18.5 percent in 2020, and nearly 130,000 people are expected to fall under the poverty line of $5.5 (PPP) a day, which implies an increase in the poverty headcount from 12.1 percent in 2019 to 14.9 percent in 2020. Government policies, which include transfers to households (Panama Solidario) for an amount equivalent to 1.3 percent of GDP, played a critical role in mitigating the adverse effects of the crisis. It is estimated that without it, poverty would have increased to 20.8 percent.
Last Updated: Apr 06, 2021