The Panama Canal is Driving Economic Growth

Panama’s economy is on the rise. The estimations are being adjusted down for 2024 based on recent events, but there can be no doubt that this is a time of growth for the Central American country.

Investment in Panama is becoming more appealing all the time. With lots of beautiful natural destinations, as well as some wonderful tourist attractions, their economy is on the incline.

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How Much is the Panama Economy Set to Grow?

Having initially been projected to grow by 5% in 2024, the Panamanian economy is now expected to grow by around 2.5% according to some. The reduced number did not include inflation, said Economy and Finance Minister Hector Alexander. He said the new number was “in light of new scenarios”, namely the shutdown of First Quantum’s Cobre Panama mine, which accounted for 5% of Panama’s GDP.

Nonetheless, the fact Panama’s economy is still set to grow this year despite such a loss reflects the otherwise relatively strong situation for the long-term growth of their economy. Moody’s Investor Service, which had initially projected a 6% growth in the GDP, said “The economic consequence of the contract controversy may affect Panama longer term”. But Felipe Chapman of Indesa said “We anticipate a slowdown in economic growth this and next year, but not a contraction”.

According to S&P,some of the negative impacts will be offset for Panama by their diversified economy, their geographical location and many private and public-sector projects. S&P added that “Despite the recent uncertainty, we expect broad continuity in economic policies following national elections”. As such, it appears Panama is confident in the direction they are heading.

How Much Has Panama’s Economy Already Grown?

The confidence seems justified, when we consider the trajectory the country has been on through the last five years. Back in 2018, Panama’s economy grew by 3.68%, which then dropped to a still reasonable 3.28% the next year. The Covid-induced drop of 17.67% in 2020 was well recovered from in 2021, with a 15.84% growth. This improvement belied the struggles many countries were still having in 2021 because of the pandemic. They solidified this growth again with a 10.81% increase by 2022, which was the 11th highest in the world.

According to panamaliving.com,gaining control over the Panama Canal in 2000 started a period of “transformation and growth that translated into the biggest per capita growth rate in Latin America”. Panama is now considered to be a service-based economy, with most of their economic growth coming from services provided both domestically and abroad. Many such services are based on global trade, with many ships passing through the canal or unloading cargo onto their ports.

Expansion of the canal that was complete in 2016 will benefit the economy well into the future. Since this expansion, which doubled the previous capacity of the canal, it can now accommodate ships capable of carrying 14,000 containers, as opposed to the ships that held 5,000 containers previously. The water highway allows people a way across the Americas and for goods to be shipped around the world. This means foreign investment opportunities are plentiful and all kinds of modern, sophisticated services become possible.

The Success of Panama’s Tourism

Panama also welcomes a lot of tourists. In a country of less than 4.5 million people, more than 2 million people visit there each year. Incredibly, tourism accounts for around 17% of the entire Panama economy. But it is easy to understand why. For such a small country, Panama boasts a large number of attractions for tourists. They have rainforests, beautiful Caribbean beaches and even a desert.

Panama has a lot of amazing cultural and historical sites as well. Many people visit El Caño Archaeological Park. Located just 160 kilometres from Panama City, this significant archaeological site was first discovered in 1925, but not formally investigated until the 1970s.

But it was not until the 2000s that archeologist Julia Mayo and her team found large burial grounds, revealing a pre-Columbian civilisation thought to have lived over a thousand years ago. There are many tour options available at this site. Located in the Province of Coclé, it is a very attractive tourist destination.

Others are greatly interested in the Biomuseo; a museum with a focus on the natural history of Panama. You’ll be able to learn all about Panama’s unique impact on the world’s biodiversity here. The building was designed by famous architect Frank Gehry – his first project in Latin America – and the colourful, striking building is well worth a visit. In the eight different galleries, tourists have both a fun and educational experience. If you’re planning a trip to the Biomuseo on your visit, you can send money to Panama using e-Pocket’s smooth platform.

Conclusion

With effective strategy and continued growth, the economy of Panama can continue to thrive. Yes, they have suffered a setback, but Panama’s proximity to so many other countries in the Americas makes it a compelling trade partner. With the ever-expanding number of investment opportunities, the service-based economy and a successful tourism industry, it is easy to imagine Panama’s economy continuing to grow rapidly in the years to come.

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