Panama Economic Structure

By: EconomyWatch Content   Date: 16 March 2010

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Panama’s economic structure is predominantly dominated by its service sector, which accounts for more than three-quarters of its GDP. Key constituents of the Panama service sector are the Panama Canal, the Colón Free Trade Zone, container ports and banking and insurance. The nation has also become a center of medical tourism because of its modern facilities and sizeable English-speaking population. 

Panama Economic Structure: Overview

Panama’s GDP, according to CIA 2009 reports, was $353.5 billion. The service sector in the nation accounted for a lion’s share of this amount, accounting for 75.5% of the total GDP and 67% of the total employment in Panama.

The growth of Panama’s industry sector has been slow for a major part of the decade due to the limited size of its domestic market. The performance of the sector has, however, picked up over the last few years. This was predominantly a result of increasing government and private investment on construction and mining. Commencement of the Panama Canal reconstruction project, in 2007, has also played a key role in the improvement of the industry sector. Key industries in Panama include brewing, textiles, adhesives, chemicals and clothing. According to CIA reports, the sector accounted for employment of 18% of the total labor force of 1.423 million in Panama.

 

In the agricultural sector, Panama is considerably dependent on imports, and the US is by far its biggest supplier. Panamanian agriculture has remained poorly conditioned since the commercialization of the Panama Canal. In fact, the sector accounts for a meager 15% of the total employment in the nation. The sector, however, does export some commodities, such as bananas, coffee and sugar.

 

Panama Economic Structure and Monetary Policy

Uniquely, Panama’s economy is not administered by an independent monetary policy or even a central bank. The dollar is acknowledged as Panama’s de facto currency. US dollar bills are considered to be the legal tender in the nation, while the balboa, Panama’s local currency, is fully tied to the US dollar. As a result of this market-driven system, the nation has a stable macroeconomic environment. In fact, Panama is the only nation in Latin America to have avoided a currency crisis and financial collapse since attaining independence.

 

 

 


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