Economy - overview: Panama's dollar-based economy rests primarily on a well-developed services sector that accounts for more than three-quarters of GDP. Services include operating the Panama Canal, logistics, banking, the Colon Free Zone, insurance, container ports, flagship registry, and tourism. Economic growth will be bolstered by the Panama Canal expansion project that began in 2007 and is estimated to be completed by 2015 at a cost of $5.3 billion - about 10-15% of current GDP. The expansion project will more than double the Canal's capacity, enabling it to accommodate ships that are too large to traverse the existing canal. The United States and China are the top users of the Canal. Panama is also constructing a metro system in Panama City, valued at $1.2 billion and scheduled to be completed by 2014. Panama's booming transportation and logistics services sectors, along with aggressive infrastructure development projects, have lead the economy to continued high growth in 2012. Foreign investment, at around 10% of GDP in both 2011 and 2012, has continued to be a source of growth. Strong economic performance has not translated into broadly shared prosperity, as Panama has the second worst income distribution in Latin America. About one-fourth of the population lives in poverty; however, from 2006 to 2012 poverty was reduced by 10 percentage points, while unemployment dropped from 12% to 4.5% of the labor force in 2013. The US-Panama Trade Promotion Agreement was approved by Congress and signed into law in October 2011, and entered into force in October 2012. Panama also achieved removal from the Organization of Economic Development's gray-list of tax havens by signing various double taxation treaties with other nations.
Definition: This entry briefly describes the type of economy, including the degree of market orientation, the level of economic development, the most important natural resources, and the unique areas of specialization. It also characterizes major economic events and policy changes in the most recent 12 months and may include a statement about one or two key future macroeconomic trends.
Source: CIA World Factbook - This page was last updated on June 30, 2015