Panama's economy is based primarily on a well-developed services sector that accounts for nearly 70% of GDP. Services include the Panama Canal, banking, the Colon Free Zone, insurance, container ports, flagship registry, tourism, and medical and healthcare.

In October 2006, Panamanians voted overwhelmingly in favor of a $5.25 billion Canal expansion project to construct a third set of locks, which is expected to be completed in 2014. The Government of Panama expects the project to be a transforming event for Panama that will provide 7,000-9,000 direct new jobs during the peak construction period of 2009-2011 and increase economic opportunities for years to come. The expansion is financed through a combination of loans from multilateral institutions and current revenues. In July 2009, the Panama Canal Authority (ACP) awarded the contract to build the locks to an international consortium led by Spain’s Sacyr Vallehermoso. The locks will be 60% wider and 40% longer than the existing locks, making them able to handle all but eight of the world’s container vessels, along with supersize tankers and bulk carriers of ores and grains.

GDP growth in 2008 was 9.2%, reflecting a slowing of the robust growth of 11.5% seen in 2007. Although growth slowed to 2.4% in the first half of 2009, due to the global economic downturn, it is expected to improve in 2010 and is still one of the most positive growth rates in the region. Growth has been fueled by the construction sector, transportation, port and Panama Canal-related activities, and tourism. As a result of this growth, government deficit as a percentage of GDP dropped to 43% in 2009, and government-issued debt is classified as one step below investment grade. A recent United Nations report highlighted progress in poverty reduction from 2001 to 2007--overall poverty fell from 37% to 29%, and extreme poverty fell from 19% to 12%. However, Panama still has the second-most unequal income distribution in Latin America.

Panama has bilateral free trade agreements (FTAs) in force with Chile, El Salvador, Taiwan, Singapore, Guatemala, Honduras, Nicaragua, and Costa Rica. Panama signed an FTA with Canada in 2008, but it has not yet entered into force. Panama is exploring free trade negotiations with Mexico, the Mercosur countries, the Andean Community, the European Union, and CARICOM. The U.S. and Panama signed a Trade Promotion Agreement (TPA) in June 2007. The agreement was overwhelmingly approved in July 2007 by the Panamanian National Assembly, but has yet to be ratified by the United States Congress. Once implemented, the agreement will promote economic opportunity by eliminating tariffs and other barriers to trade of goods and services.

GDP (2008 est.): $23.09 billion.
Annual growth rate: 4.5% (2010 projected); 2.5% (2009 projected); 9.2% (2008); 11.5% (2007); 8.5% (2006).
Per capita GDP: $11,700 (2008 est., purchasing power parity); $10,900 (2007); $9,900 (2006).
Natural resources: Timber, copper, gold.
Services (67% of GDP): Finance, insurance, health and medical, transportation, telecommunications, Canal and maritime services, tourism, Colon Free Zone, public administration, and general commerce.
Agriculture (6.2% of GDP): Products--bananas, corn, sugarcane, rice, coffee, shrimp, timber, vegetables, livestock.
Industry/manufacturing (14.2% of GDP): construction, brewing, cement and other construction materials, sugar milling.
Trade (2008): Exports (goods)--$10.29 billion: bananas, shrimp, sugar, coffee, and clothing. Export partners (2008)--U.S. 17.2%, Germany 14.6%, Italy 9%, Greece 6.1%, Netherlands 4.8%, Denmark 4.2%, Spain 4.2%. Imports (goods)--$15 billion: capital goods, foodstuffs, chemicals, consumer and intermediate goods. Import partners (2008)--Japan 29.5%, Singapore 17.6%, China 15.4%, U.S. 13.2%, France 4.5%. U.S. exports to Panama (2008)--$4.887 billion: primarily oil and capital and technology intensive manufactured goods. Panama exports to U.S. (2008)--$379.1 million: primarily seafood and repaired goods.
Foreign direct investment (2008): $2.4 billion.