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Economy of Panama
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Economy of Panama
The economy of Panama is based mainly on the tourism and services sector, which accounts for nearly 80% of its GDP and accounts for most of its foreign income. Services include banking, commerce, insurance, container ports, and flagship registry, medical and health and tourism. Historically, the Panama Canal (and the nearby Colón Free Trade Zone) was the key source of Panama's income, but its importance has been displaced by the services sector. As of 2025[update] Panama had a GDP of 90.41 billion USD. This equated to 19,800 USD per capita. In 2025, Panama also had an unemployment rate of 8%. Panama has a gross national debt of 59.6% of GDP. In 2024, Panama exported 37.37 billion USD worth of exports, an increase from 35.71 billion USD in 2022.
The country's industry includes the manufacturing of aircraft spare parts, cement and ceramics, drinks, adhesives, and textiles. Additionally, exports from Panama include bananas, shrimp, sugar, coffee, and clothing. Panama's economy is fully dollarized, with the US dollar being legal tender in the country. Panama was the first foreign country to adopt the U.S. dollar as its legal currency (1903) after its secession from Colombia (with U.S. help) temporarily deprived it of a local currency. Panama is a high income economy with a history of low inflation.
Since the early 16th century, Panama's geographic location gave the country a comparative advantage. From the earliest Spanish times, ports on each coast and a trail between them handled much of Spain's colonial trade to the benefit of the inhabitants of the port cities.
Panama has always been dependent on world commerce for its prosperity, and it is affected by the cyclical nature of international trade. The economy stagnated in the 18th century as colonial exchange via the isthmus declined. In the mid-19th century, Panama's economy boomed as a result of increased cargo and passengers associated with the California Gold Rush. A railroad across the isthmus, completed in 1855, extended economic growth for about fifteen years until completion of the first transcontinental railroad in the United States led to a decline in trans-isthmian traffic.
France's efforts to construct a canal across the isthmus in the 1880s and efforts by the United States in the early 20th century stimulated the Panamanian economy. The United States completed the canal in 1914. However, the world depression of the 1930s reduced international trade and canal traffic, causing widespread unemployment in the terminal cities and generating a flow of workers to subsistence farming. During World War II, canal traffic did not increase, but the economy boomed as the convoy system and the presence of United States forces, sent to defend the canal, increased foreign spending in the canal cities. The end of the war was followed by an economic depression and another movement of unemployed people into agriculture.
The postwar depression gave way to rapid economic expansion between 1950 and 1970. All sectors contributed to the growth. Agricultural output rose, and commerce evolved into a relatively sophisticated wholesale and retail system. Banking, tourism, and the export of services to the Canal Zone grew rapidly. Most importantly, an increase in world trade provided a major stimulus to use of the canal and to the economy.
In the 1970s and 1980s, Panama's growth fluctuated with the vagaries of the world economy. After 1973, economic expansion slowed considerably as a result of a number of international and domestic factors. In the early 1980s, the economy rebounded. The acute recession in Latin America after 1982, however, wreaked havoc on Panama's economy. This period coincided with the rise to power of General Manuel Noriega during which Panama became increasingly indebted.
The United States started to pursue Noriega, culminating in sanctions that froze Panama's assets in the United States, and because Panama used the US dollar it was forced to default on its IMF debt in 1987. Economic turmoil in the country included a general strike and the banking system closing down for two months. The United States invaded Panama in 1989 and forced the surrender of Noriega. Panama regained access to IMF funds in 1992.
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Economy of Panama
The economy of Panama is based mainly on the tourism and services sector, which accounts for nearly 80% of its GDP and accounts for most of its foreign income. Services include banking, commerce, insurance, container ports, and flagship registry, medical and health and tourism. Historically, the Panama Canal (and the nearby Colón Free Trade Zone) was the key source of Panama's income, but its importance has been displaced by the services sector. As of 2025[update] Panama had a GDP of 90.41 billion USD. This equated to 19,800 USD per capita. In 2025, Panama also had an unemployment rate of 8%. Panama has a gross national debt of 59.6% of GDP. In 2024, Panama exported 37.37 billion USD worth of exports, an increase from 35.71 billion USD in 2022.
The country's industry includes the manufacturing of aircraft spare parts, cement and ceramics, drinks, adhesives, and textiles. Additionally, exports from Panama include bananas, shrimp, sugar, coffee, and clothing. Panama's economy is fully dollarized, with the US dollar being legal tender in the country. Panama was the first foreign country to adopt the U.S. dollar as its legal currency (1903) after its secession from Colombia (with U.S. help) temporarily deprived it of a local currency. Panama is a high income economy with a history of low inflation.
Since the early 16th century, Panama's geographic location gave the country a comparative advantage. From the earliest Spanish times, ports on each coast and a trail between them handled much of Spain's colonial trade to the benefit of the inhabitants of the port cities.
Panama has always been dependent on world commerce for its prosperity, and it is affected by the cyclical nature of international trade. The economy stagnated in the 18th century as colonial exchange via the isthmus declined. In the mid-19th century, Panama's economy boomed as a result of increased cargo and passengers associated with the California Gold Rush. A railroad across the isthmus, completed in 1855, extended economic growth for about fifteen years until completion of the first transcontinental railroad in the United States led to a decline in trans-isthmian traffic.
France's efforts to construct a canal across the isthmus in the 1880s and efforts by the United States in the early 20th century stimulated the Panamanian economy. The United States completed the canal in 1914. However, the world depression of the 1930s reduced international trade and canal traffic, causing widespread unemployment in the terminal cities and generating a flow of workers to subsistence farming. During World War II, canal traffic did not increase, but the economy boomed as the convoy system and the presence of United States forces, sent to defend the canal, increased foreign spending in the canal cities. The end of the war was followed by an economic depression and another movement of unemployed people into agriculture.
The postwar depression gave way to rapid economic expansion between 1950 and 1970. All sectors contributed to the growth. Agricultural output rose, and commerce evolved into a relatively sophisticated wholesale and retail system. Banking, tourism, and the export of services to the Canal Zone grew rapidly. Most importantly, an increase in world trade provided a major stimulus to use of the canal and to the economy.
In the 1970s and 1980s, Panama's growth fluctuated with the vagaries of the world economy. After 1973, economic expansion slowed considerably as a result of a number of international and domestic factors. In the early 1980s, the economy rebounded. The acute recession in Latin America after 1982, however, wreaked havoc on Panama's economy. This period coincided with the rise to power of General Manuel Noriega during which Panama became increasingly indebted.
The United States started to pursue Noriega, culminating in sanctions that froze Panama's assets in the United States, and because Panama used the US dollar it was forced to default on its IMF debt in 1987. Economic turmoil in the country included a general strike and the banking system closing down for two months. The United States invaded Panama in 1989 and forced the surrender of Noriega. Panama regained access to IMF funds in 1992.
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