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Overview

  • 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

  • The Government of Panama and the World Bank Group developed the Country Partnership Framework (CPF) 2015-2021 defining the areas of World Bank Group support in the country. The CPF is based on three pillars for the World Bank Group engagement:

    • Supporting continued high growth
    • Ensuring inclusion and opportunities for marginalized and indigenous groups
    • Bolstering resilience and sustainability

    The World Bank’s portfolio in Panama consists of five projects in the areas of improving access to services for Indigenous Peoples, disaster risk management, social protection, and COVID-19 response and recovery.  It is also complemented by an array of analytical and advisory services in key areas, such as urban resilience and disaster risk management, health systems, Public-Private Partnership taxation and anti-money laundering, climate change, and social expenditures.

    Panama’s Pandemic Response and Growth Recovery Development Policy Operation, approved in December 2020, includes policy actions to protect human capital during the pandemic, particularly for vulnerable rural and Indigenous populations, as well as policies seeking to strengthen institutions to combat money laundering, improve fiscal management, and implement the Public-Private Partnerships agenda.

    Last Updated: Apr 06, 2021

  • The International Bank for Reconstruction and Development (IBRD) financing helped achieve the following results:

    The COVID-19 Emergency Response Project is supporting the purchase of medical supplies for the prevention, detection, and treatment of COVID-19, and strengthen national systems for public health preparedness. The project also finances critical inputs for infection control in health facilities, as well as investigation of suspected cases and contact tracing.

    The Enhanced Capacity for Disaster Risk Management and Adaptation to Climate Change Development Policy Loan with a Catastrophe Risk Deferred Drawdown Option provided quick and flexible support in addressing the national drought emergency triggered by the El Niño phenomenon (2015-2016), including supporting the Water Security High Level Committee in the development and implementation of the National Water Security Plan. The project also funded technical assistance activities that led to the development of the first Disaster Risk Finance and Insurance Framework in Latin America, and a strengthened emergency preparedness and response capacity at the subnational level. Finally, in March 2020, $41 million of the loan was disbursed to quickly expand the health care network in response to the COVID-19.

    Increased reliability of energy supply.  Through a Development Policy Loan, the IBRD has supported policies promoting better targeted tariff subsidies and establishing incentives to increase the share of renewable energy in the power generation matrix. These efforts were complemented by the International Finance Corporation advisory services to increase energy efficiency through the implementation of a Green Building Code, as well as investments and technical assistance to ramp up hydroelectric, wind, and Liquified Natural Gas projects. Together, these engagements aim to improve the reliability of the energy system for Panamanians, while also displacing the use of heavy fuel and diesel and reducing carbon dioxide emissions.

    Improved effectiveness in the management of protected areas in Panama and the conservation of globally significant biodiversity. Through the Global Environment Facility, the project directly benefited 152,119 Panamanians, almost half of them females, through 30 sub-projects supporting income-generation and biodiversity-friendly production and marketing systems. More than 645,015 hectares were brought under biodiversity protection and 1,611 hectares of cocoa, plantain, and coffee plantations were certified by internationally/nationally recognized standards. An endowment fund to support sustainable management of protected areas was established and is operating with an initial capitalization of $5 million (now standing at $20.3 million), as part of one window of the broader national fund for water, protected areas, and forest.

    Economic Empowerment of Indigenous Women Study. With grant resources, the Bank funded a pilot intervention in six communities to support ecosystem development, financial inclusion, and technical assistance for women producers. By participating in the Cajas Rurales, indigenous women developed their savings capacity, improved their household finances, and obtained access to finance a portfolio of 88 loans.

    Last Updated: Apr 06, 2021

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LENDING

Panama: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments


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Additional Resources

Country Office Contacts

PANAMA +507 831-2000
Avenida Aquilino De La Guardia y calle 47 Marbella, Edificio Ocean Business Plaza, Piso 21, Oficina 2111. Panama City
cfloresmora@worldbank.org
USA +1 202 473-1000
1818 H Street NW, Washington, DC 20433
adavis@worldbankgroup.org