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The Economy of Panamamarker is a fully dollarized free market economy with a history of low inflation. It is based mainly on the services industry, heavily weighted toward banking, commerce, and tourism. The hand-over of the canalmarker and military installations by the USmarker has given rise to new construction projects.

Panama's economy is based primarily on a well-developed services sector that accounts for nearly 80% of its GDP. Services include the Panama Canalmarker, banking, the Colón Free Trade Zone, insurance, container ports, and flagship registry, medical and health, and other business. While the country's industry includes, manufacturing of aircraft spare parts, cements, drinks, adhesives, textiles and more recently, handmade artisan creation of Bush planes. Also the leading exports for Panama are bananas, shrimp, sugar, coffee, and clothing.

Panama Government and UN Stats

Nominal GDP in Panama was (in million of balboa or US dollar) 11,691 in 2002, 13,099 in 2004, 14,004 in 2005 (Prelim), 15,141.9 in 2006 (est), as reported by Office of Statistics and Census, Government of Panama. Growth from 2002 to 2006 has been especially strong in the transport and communications sector, which has become the biggest component of GDP, although many sectors have seen strong growth. Real GDP has risen 7.5% (03-04), 6.9% (04-05), 8.1% (05-06). by United Nations Economic Commission for Latin America and the Caribbean (ECLAC) forecast 8.5% for 2006-07, and 7.5% for 2007-08, both years being the highest for all of Latin America.

Economic history

Since the early 1500s, Panamanians have relied on the country's comparative advantage—its geography. Exploitation of this advantage began soon after the Spanish arrived, when the conquistadors used Panama to transship gold and silver from Peru to Spain. Ports on each coast and a trail between them handled much of Spain's colonial trade from which the inhabitants of the port cities prospered. This was the beginning of the country's historical dependence on world commerce for prosperity and imports. Agriculture received little attention until the twentieth century, and by the 1980s had—for much of the population—barely developed beyond indigenous Indian techniques. Industry developed slowly because the flow of goods from Europe and later from North America created a disincentive for local production.

Panama has been affected by the cyclical nature of international trade. The economy stagnated in the 1700s as colonial exchange via the isthmus declined. In the mid-1800s, Panama's economy boomed as a result of increased cargo and passengers associated with the California gold rush. A railroad across the isthmus, completed in 1855, prolonged economic growth for about fifteen years until completion of the first transcontinental railroad in the United States caused trans-isthmian traffic to decline. France's efforts to construct a canal across the isthmus in the 1880s and efforts by the United States in the early 1900s stimulated the Panamanian economy.

Macroeconomic indicators
GDP (PPP) 40.152 billion USD (2009)
GDP (Nominal) 25 billion USD (2008)
GNP 38.08 billion USD (2008)
GDP growth 11.2% (2007)
GDP per capita 12,600 USD
GNI per capita 11,900 USD (2008)
Inflation (CPI) 2.4% (2006)
Gini index 56.6
Unemployment 5.1% (2007)
HDI 0.832
Labour force 1.392 million

Year Gross domestic product US dollar exchange Growth
2007 39.605 1 11.5%
2008 42.446 1 9.2%
2009 43.719 1 2.4%(july,2009)
The United States completed the canal in 1914, and canal traffic expanded by an average of 15 percent a year between 1915 and 1930. The stimulus was strongly felt in Panama City and Colón, the terminal cities of the canal. The world depression of the 1930s reduced international trade and canal traffic, however, causing extensive unemployment in the terminal cities and generating a flow of workers to subsistence farming. During World War II, canal traffic did not increase, but the economy boomed as the convoy system and the presence of United States forces, sent to defend the canal, increased foreign spending in the canal cities. The end of the war was followed by an economic depression and another exodus of unemployed people into agriculture. The government initiated a modest public works program, instituted price supports for major crops, and increased protection for selected agricultural and industrial products.

The postwar depression gave way to rapid economic expansion between 1950 and 1970, when GDP increased by an average of 6.4 percent a year, one of the highest sustained growth rates in the world. All sectors contributed to the growth. Agricultural output rose, boosted by greater fishing activities (especially shrimp), the development of high-value fruit and vegetable production, and the rapid growth of banana exports after disease-resistant trees were planted. Commerce evolved into a relatively sophisticated wholesale and retail system. Banking, tourism, and the export of services to the Canal Zone grew rapidly. Most importantly, an increase in world trade provided a major stimulus to use of the canal and to the economy.

In the 1970s and 1980s, Panama's growth fluctuated with the vagaries of the world economy. After 1973, economic expansion slowed considerably as the result of a number of international and domestic factors (see Recent Economic Performance , this ch.). Real GDP growth averaged 3.5 percent a year between 1973 and 1979. In the early 1980s, the economy rebounded with GDP growth rates of 15.4 percent in 1980, 4.2 percent in 1981, and 5.6 percent in 1982. The acute recession in Latin America after 1982, however, wreaked havoc on Panama's economy. GDP growth in 1983 was a mere 0.4 percent; in 1984 it was negative 0.4 percent. In 1985 Panama experienced economic recovery with 4.1-percent GDP growth; the corresponding figure for 1986 was estimated to be 2.8 percent.

Since taking office in 1994 President Ernesto Perez Balladares advanced an economic liberalization program designed to liberalize the trade regime, attract foreign investment, privatize state-owned enterprises, institute fiscal discipline and privatized its two ports in 1997 and approved the sale of the railroad in early assets. Panama joined the World Trade Organization (WTO) and a banking reform law was approved by the legislature in early 1998 and dismantled the Central bank. After two years of near stagnation the reforms began to take root; GDP grew by 3.6% in 1997 and grew by more than 6% in 1998. The most important sectors which drove growth were the Panama Canal and the shipping and port activities of The Colon Free Zone which also rebounded from a slow year in 1996.

Economic growth will, from the 2009 onwards, be bolstered by the Panama Canal expansion project that began in 2007 and is scheduled to be completed by 2014 at a cost of $5.3 billion - about 25% of current GDP. The expansion project will more than double the Canal's capacity, enabling it to accommodate ships that are now too large to transverse the transoceanic crossway, and should help to reduce the high unemployment rate. Strong economic performance has reduced the national poverty level to 29% in 2008; however, Panama has the second most unequal income distribution in Latin America. The government has implemented tax reforms, as well as social security reforms, and backs regional trade agreements and development of tourism. Not a CAFTA signatory, Panama in December 2006 independently negotiated a free trade agreement with the US, which, when implemented, will help promote the country's economic growth.


For centuries, agriculture was the dominant economic activity for most of Panama's population. After construction of the Panama Canal, agriculture declined; its share of GDP fell from 29 percent in 1950 to just over 9 percent in 1985.[1] Currently, agriculture and fisheries comprise 7.4% of the country's GDP.[2] Panama is a net food importer and the U.S. by far, is its main supplier. Though for many years, Panamanian agriculture remained poorly conditioned, after the 1970s, agriculture became mechanized as industrialization became more intensified.


Taxation in Panama, which is governed by the Fiscal Code, is on a territorial basis; this is to say, that taxes apply only to income or gains derived through business carried on in Panama itself. The existence of a sales or administration office in Panama, or the re-invoicing of external transactions at a profit, does not of itself give rise to taxation if the underlying transactions take place outside Panama. Dividends paid out of such earnings are free of taxation.

In February, 2005, Panama’s unicameral legislature approved a major fiscal reform package in order to raise revenues from new business taxes, and reduce the country’s level of debt. The legislature voted 46 to 28 in favour of the measures, which include a new 1.4% tax on companies’ gross revenues, and a 1% levy on firms operating in the Colon Free Trade Zone – the largest free port in the Americas.

In July, 2005, all firms which prior to 2005 were exempt from value added tax in Panama are affected by a new interpretation of the country's Tax Code by the tax authorities. In a little publicised move, Panama’s Revenue Office circulated a series of opinions which stated that the recent tax reform has abolished all VAT exemptions and special treatment given prior to February 2005.

Further reforms

President Ricardo Martinelli has promised to implement a flat tax system with a flat tax of 10% and which promises to raise revenues, put inflation under control and which will allow enormous real wage gains.


Panama City's from the Corredor Sur highway.
Highways well developed for Latin America. In Panama City are six highways working being that the Panama-Arraijan Bridge of the Americasmarker, Panama-Arraijan Centennial Bridge, Arraijan-Chorrera, Corredor Norte, Corredor Sur, and Autopista Alberto Motta.

Panama's roads, traffic and transportation systems are generally safe, with traffic lights having undergone a recent overhaul and most have been replaced by inteligent traffic lights, even at busy intersections where they are not need. Driving during the midday is usually slow and demanding due to dense traffic, frequent traffic jams, and street renovation programs. On roads where poor lighting and driving conditions prevail, night driving is difficult and in many cases, restricted by local authorities, this usually occurs in informal settlements. Night driving is particularly hazardous in these areas. Traffic in Panama moves on the right, and Panamanian law requires that drivers and passengers wear seat belts.

Currently, Panama has an extensive and efficient, yet confusing to tourists, form of public transportation consisting of colorful painted buses colloquially known as . A is usually "customized" or painted with bright colors, usually depicting famous actors, politicians or singers. It is now popular all over the city (and also in neighboring towns) for bus drivers to personally customize the interior and exterior of their . Panama City's only transportation problem includes frequent traffic jams due to poor planning for the now extensive private transport ownership.


The Economist forecasts that economic of Panama will grow by 2.3% in 2009, but before forecasts -1.3%.

Panama Economy Insight forecasts that Panama’s GDP will contract by 0.1% in 2009 due to the impact that the global recession is having on demand for goods and services exports, real estate and construction among others economic sectors. This GDP forecast is equally negative to previous monthly reports that Panama Economy Insight had been publishing from January in its web site

Because the real estate supply began in April 2009 an adjustment process downwards, now Panama Economy Insight forecasts that economic growth in 2010 will be just 2.2%, despite the Canal of Panama is being expanded and the contract for design and construction of the third set of locks (the main component of the Canal expansion) was awarded in July 15.

Economic Commission for Latin America and Caribbeanwas very optimistic and forecast that Panama will grow 4%, but in July 15th change your forecast by 2.5%. JP Morganforecasts only 1.5%. International Monetary Fund, Indesa, Delloite and Standard & Poor forecast 1.8%, 1.8%, 3.5% and 3.5% respectively.


(% change of GDP)
Forecaster 2009 2010
Ministry of Economy and Finance 3.0 5.0
The Economist 2.3 2.6
Panama Economy Insight -0.1 2.2
JP Morgan 1.5
International Monetary Fund 1.8 3.7
Indesa 1.8
Deloitte 3.5
Standar & Poor 2.5 5.0
Updated: November 16th 2009.


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