Panama's economy is based primarily on a well-developed services sector that accounts for nearly 80% 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 in favor of a $5.25 billion Canal expansion project to construct a third set of locks, which is expected to take eight to ten years to complete. 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 set the tone economically for years to come. The expansion is expected to be financed through a combination of loans from multilateral institutions and current revenues.
GDP growth in 2008 was 9.2%, reflecting a slowing of the robust growth seen in 2007 of 11.5%. Although growth is expected to further slow in 2009 to between 1% and 3%, due to the global economic downturn, it 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. 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) with Chile, El Salvador, Taiwan, Singapore, Honduras, and Costa Rica and signed an FTA with Nicaragua in January 2009. Panama is in the midst of free trade negotiations with Canada and is exploring free trade negotiations with Mexico and other Latin American countries. The U.S. and Panama signed a Trade Promotion Agreement (TPA) in June 2007; Panama ratified the agreement in July 2007. It still requires U.S. congressional approval to enter into force. This agreement will promote economic opportunity by eliminating tariffs and other barriers to trade of goods and services.
Information by U.S. Department of State
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