Author: Federico Bilches
Panama has been one of the fastest growing economies in Latin America over the past decade, with real GDP expanding an average of 8.4% between 2004 and 2013. Moreover, Panama performed relatively well during the global financial crisis, including 4.0% growth in 2009 when many other countries in the region suffered a contraction. The Panamanian economy accelerated in the following years, reaching double-digit growth rates in 2010 and 2011.
The economy of Panama is centered on a highly-developed services sector, which represents more than 75% of gross domestic product (GDP). The Panama Canal and use of the U.S. dollar have promoted the strengthening of a globally-oriented services economy. The Panama Canal is essential to global trade and accounts for almost 10% of the country’s GDP. Other important components of the service economy are the Colon Free Trade Zone (CFZ), which is the second largest free port in the world, and the Trans-Panama Pipeline, which allows for the transport of crude oil between the Pacific and Atlantic coasts. The license and registry of the Panama flag to merchant ships is another source of economic activity. Panama also has a large logistics and storage services sector, as well as a modern banking and insurance industry. The agricultural sector has lost importance over the years, accounting for less than 10% of GDP today. The main cash crops produced in the country are bananas, corn, coffee and sugar.
2016 was not a good year for Latin America, mainly due to the economic and political crises experienced by Brazil and Venezuela, but Central America is the most dynamic sub region, with a growth of 3.6%, driven by Dominican Republic (6.4%) and Panama (5.2%), as the 2 countries with a better performance.
The EFE agency reported that Panama broke their record this year of receiving multinationals with the incorporation of 25 new companies bringing the total number of companies to 134 under this scheme.
According to the Ministry of Comerce and Industry (MICI), the 134 companies represent a foreign investment of 800 million dollars and the creation of 5,000 jobs.
It is true that the Panamanian economy looks like the most profitable for this 2017, the governmental decisions must be accompanied by private investment to generate better results.
For 2017, Panama will promote its advertising and competitive advantages as a country to invest in.
Strengthening the quality of education will be important to improve growth prospects. The Panamanian workforce has a higher level of educational attainment than other countries in Central America and the Dominican Republic, but this has not translated into improved educational outcomes.
Panama has both a higher share of secondary/tertiary graduates and average years of schooling of its population than comparator countries.
Yet, Panama has performed poorly in international competency tests. For example, its performance in the 2013 TERCE test that assessed competency of third and sixth graders in Latin America across a variety of subjects suggests that educational quality is below that of most countries in Latin America.
Performance was particularly weak in mathematics and reading comprehension. More generally, Panama has underperformed the Latin American region on the education and training.
Agriculture has been the hardest hit economic sector of 2016. The unfulfilled promises in Barú, the unjustified imports of rice and onion and the unfavorable climate, have taken a toll on the spirit of the farmers… and also their pocket.
For this 2017, the Foreign Ministry of Panama informed that it would coordinate a round-table in which local producers and the Ministries of Agricultural Development and Trade and Industry will participate in order to prop up the sector.
Agriculture currently accounts for less than 3% of Panama’s GDP.
Farmers and Foreign Ministry spoke “about the importance of implementing actions to strengthen poultry and livestock, so that they continue to the country’s economic growth based on good technological practices, human talent development, good environmental and production practices”