Editorial

Panama has made significant strides in improving economic performance and social inclusion since the turn of the century. Economic growth started to accelerate after the social unrest of the late 1980s, which resulted in income per capita doubling since 2000. Today, Panama has consolidated an open economy with low unemployment, high investment rates and a stable macroeconomic framework. These achievements contributed to improving well-being and reducing poverty.

At current economic growth rates, Panama is set to become a high income country in 2021 but challenges remain to make it sustainable. After it took Panama 67 years to traverse the middle income bracket, making this achievement sustainable will require a more balanced development model. Economic growth has depended on few, highly productive sectors operating in Colón and Panama City. As this recent growth has been concentrated at the both regional and sectorial levels, its benefits have not been shared equally across the country. Such economic configuration not only increases social disparities, but also threatens to undermine the progresses achieved, as it leaves many in the vulnerable middle class.

Securing past advances and steering towards a new development model requires the implementation of a comprehensive policy agenda. First, it is necessary to equilibrate access to public services across all regions in Panama – particularly in education and skills, health, sanitation and transport infrastructure. Second, informality remains high at 40% of the workforce, affecting mainly low-skilled workers and the vulnerable population. In response, better skills and training policies, as well as suitable small- and medium-sized enterprises and labour market regulations, are needed. Finally, these reforms require corresponding mechanisms for financing development. Strengthening the efficiency and equity of taxation and crafting regulation for public-private partnerships is essential. At the international level, continuing the implementation of international transparency and exchange of information would instil greater confidence.

Reforms are needed to achieve a more inclusive and sustainable path, and the OECD, together with other regional organisations, can support Panama’s efforts. This Multi-Dimensional Country Review helps meet these challenges. This first volume presents a diagnosis of some of the main impediments to development. Forthcoming volumes will present an in-depth analysis of the main constraints, accompanied by specific policy recommendations to carry out structural reforms and create the conditions for making reform happen. These analyses support Panama’s own development agenda towards achieving a brighter future for its citizens.

Mario Pezzini

Director of the OECD Development Centre and Special Advisor to the Secretary-General on Development

Martine Durand

OECD Chief Statistician Director of the Statistics Directorate

Catherine Mann

OECD Chief Economist Head of the Economics Department