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 so the Canal can handle all but eight of the world’s container vessels, along with supersize tankers and bulk carriers of ores and grains.
GDP growth in 2009 was 2.4%, reflecting a slowing of the robust growth of 11.0% seen in 2008. Although growth slowed in 2009, due to the global economic downturn, it has improved in 2010 and is still one of the most positive growth rates in the region. Growth has been fueled by the construction, transportation, maritime, and tourism sectors and Panama Canal-related activities. 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 the lowest rung of 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%.
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 May 2010, but it has not yet entered into force. Panama is exploring free trade negotiations with Mexico, Colombia, 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 and will provide a framework for any trade disputes.
GDP (2008 est.): $25.04 billion.
Annual growth rate: 5.6% (2010 projected); 2.4% (2009); 11% (2008); 12% (2007).
Per capita GDP: $11,900 (2009 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 (2009): Exports (goods)--$821 million in exports, with salmon/tuna as the largest dollar amount, followed by beef, watermelon, shrimp, and pineapples. Export partners (as a percentage of total export value in 2009)--U.S. 42%, China (P.R.C.) and Taiwan 5.3%, Costa Rica 7.3%, Sweden 5.4%, Netherlands 6.5%, Spain 6.2%. Imports (goods)--$7.8 billion was imported in 2009: petrol and fuel oils capture the largest percentage by weight (21%) and in dollar amount (8.5%). Capital goods, foodstuffs, chemicals, and consumer and intermediate goods are the remaining imports. Import partners (2009)--the top five countries include the U.S. 29%, Costa Rica 5.2%, Mexico 4.5%, China 4.2%, and Japan 3.6%. U.S. exports to Panama (2009)--$4.3 billion: primarily oil and capital- and technology-intensive manufactured goods. Panama exports to U.S. (2009)--$350 million: primarily seafood and repaired goods.
Foreign direct investment (2009): $1.8 billion.