Latin American Economic Outlook 2022

Panama

1. Recent trends

Poverty in Panama decreased from 16.8% in 2016 to 15.0% in 2019, lower than the Latin America and the Caribbean (LAC) average for 2020 (26.3%). Extreme poverty decreased in that period from 7.4% to 6.8% and remains below the LAC average (8.7% in 2020). The Gini index decreased from 50.4 in 2016 to 49.8 in 2019, remaining above the LAC average (45.3 in 2019). Regarding environmental indicators, in 2019, greenhouse gas (GHG) emissions per capita were 4.9 tonnes of carbon dioxide equivalent (t CO₂e), lower than the averages for LAC (6.3) and countries belonging to the Organisation for Economic Co-operation and Development (OECD) (9.1). That year, the share of the population exposed to air pollution levels that pose risks to human health (PM2.5 at more than 10 µg/m³) was 99.8%, higher than 95.4% for LAC and 61.0% for the OECD. The marine protected area of Panama accounted for 26.8% of its territorial waters in 2021, well above 7.3% for LAC and 18.6% for the OECD. On the fiscal side, environmentally related tax revenue was 0.4% of gross domestic product (GDP) in 2020, below LAC (1.0%) and the OECD (2.1%). Total tax revenue as a percentage of GDP (13.7%) remained lower than the averages for LAC (21.9%) and the OECD (33.5%).

2. Long-term development policies for a green transition

Panama is highly vulnerable to extreme weather events caused by climate change. In its National Strategy for Climate Change 2050 (2019), the country presents the vision for its green transition. The Executive Decree No. 100 (2020) regulates the mitigation chapter of the General Environmental Law and provides for the management and monitoring of low-carbon economic and social development.

Panama’s mitigation efforts primarily address the energy transition. The National Energy Plan 2015-2050 establishes the goal of a 70% renewable energy mix. The government presented strategic guidelines (2020-2030) that focus on strengthening institutions, the energy sector and the hydrocarbon sector. Panama has developed National Strategies for Electric Mobility (2019), Distributed Generation (2021), Universal Energy Access (2022), Innovation for the National Interconnected System (2022), and the Rational and Efficient Use of Energy (2022). Additional priorities are set through an action plan for solar thermal energy (2021), a regulation on sustainable buildings (2019), the Panama Cooling Plan (2020), and the introduction of the Green Hydrogen Roadmap (2022). The Reduce Tu Huella Corporativa programme promotes voluntary private sector engagement by offering a standardised process to quantify of corporate carbon and water footprints. Panama has also launched a National Forest Restoration Programme 2021-25. Regarding adaptation, Panama recently launched a coastal adaptation project for gender-based planning instruments with the World Bank PROBLUE Fund (2022) and is preparing a nature-based adaptation project in Bocas del Toro and Limon, with support from the Adaptation Fund and the United Nations Environment Programme (UNEP). For monitoring purposes, Panama implemented a project to measure its adaptation progress, with support from the Adaptation Fund, and a platform (SIRED) that focuses on the losses and damages caused by climate change, with support from the World Bank. A National Climate Transparency Platform gathers all the information on Panama’s climate actions.

In its international partnerships,within LAC, Panama is strengthening the adaptive capacity of coastal communities, in co-operation with Cuba, the Food and Agricultural Organization (FAO) and the Adaptation Fund, and promotes climate-resilient water management, with support from the Colombian Fundación Natura. Beyond LAC, Panama fosters sustainable land management and restoration, supported by the FAO and the Global Environment Facility (GEF). To increase urban resilience, Panama is part of the Nature4Cities Latam project, co-ordinated by UNEP and the Green Climate Fund (GCF). To incorporate gender considerations in green transition policies, Panama established a National Gender and Climate Change Plan in collaboration with the United Nations Development Programme (UNDP).

Regarding green finance Panama adopted a manual for labelling public spending projects according to climate change criteria in 2022. Panama’s national stock exchange issued guidelines on sustainable investment. Panama is also in the process of structuring an exchange system for carbon credits and developing a national REDD+ (Reducing Emissions from Deforestation and Forest Degradation) strategy. Panama is part of the Working Group on Sustainable Finance Taxonomies in LAC to develop a common framework of sustainable finance taxonomies for the region.

Key indicators – Panama

	Panama		LAC		OECD
Social
	2016	2019	2016	2020	2016	2020
Extreme poverty	7.4	6.8	8.1	8.7	N/A	N/A
Poverty	16.8	15.0	25.9	26.3	N/A	N/A
Share of Internet users (% of population)	54.0	63.6	53.7	68.1	81.8	88.0
	2016	2019	2016	2020	2016	2019
Gini index	50.4	49.8	46.3	45.3	34.9	34.2
	2010	2018	2009	2018	2009	2018
Share of total population in informal households (%)	N/A	N/A	43.4	36.3	N/A	N/A
Share of total population in informal households, upper-income quintile (%)	N/A	N/A	24.5	13.6	N/A	N/A
Share of total population in informal households, lower-income quintile (%)	N/A	N/A	70.4	72.0	N/A	N/A
	2016	2019	2016	2019	2016	2019
Health expenditure (% of GDP)	7.3	7.6	6.5	6.8	8.7	8.8
SIGI index	N/A	N/A	N/A	25.4	N/A	17.5
	2015	2018	2015	2018	2015	2018
PISA score in science	N/A	365	411	407	489	487
Productivity and innovation
	2016	2021	2016	2021	2016	2021
Labour productivity (% of the United States)	N/A	N/A	29.0	26.6	69.9	67.2
	2016	2020	2016	2020	2016	2020
High-tech exports (% of manufactured exports)	9.2	N/A	8.4	7.2	16.5	16.2
	2016	2019	2016	2019	2016	2019
R&D expenditures (% of GDP)	0.1	N/A	0.3	0.4	1.8	2.0
Citizens’ perceptions and institutions
	2016	2019	2016	2021	2016	2021
Share of population satisfied with efforts to preserve the environment (%)	48.8	50.3	46.2	42.0	55.3	51.2
Share of population with confidence in national government (%)	33.0	40.7	34.2	39.4	40.3	46.3
Share of population that thinks corruption is widespread throughout government (%)	77.5	82.9	74.5	70.0	59.0	54.9
Share of population satisfied with the education system (%)	69.2	64.9	64.9	54.3	67.0	66.8
Share of urban population satisfied with the availability of quality health care (%)	60.3	49.5	49.2	48.9	68.2	69.5
Environment and the green transition
	2004-19		2004-19		2004-19
Loss of natural and semi-natural vegetated land (%)	0.9		1.5		1.3
	2016	2019	2016	2019	2016	2019
GHG emissions per capita excluding LUCF (t CO2e)	4.4	4.9	6.3	6.3	9.6	9.1
Air pollution – exposure to PM2.5 (annual average exposure to more than 10 µg/m3, % of population)	99.8	99.8	95.5	95.4	61.3	61.0
	2016	2020	2016	2019	2016	2020
Contribution of renewables to total primary energy supply (%)	22.4	17.2	34.2	33.4	19.7	22.9
	2016	2021	2016	2021	2016	2021
Marine protected areas (% of territorial waters)	1.7	26.8	2.5	7.3	16.5	18.6
Fiscal position
	2016	2020	2016	2020	2016	2020
Environmentally related tax revenue (% of GDP)	0.7	0.4	1.1	1.0	2.4	2.1
Total tax revenues (% of GDP)	15.5	13.7	22.2	21.9	33.6	33.5
Share of VAT (% GDP)	2.6	1.8	5.8	5.6	6.6	6.7
Share of PIT (% GDP)	1.5	1.8	2.1	2.2	7.8	8.3
Share of CIT (% of GDP)	1.8	1.1	3.3	3.4	2.9	2.7
Perception of tax evasion (%)	N/A	29.8	N/A	27.3	N/A	N/A
Debt service (% of total tax revenue)	10.5	17.0	11.3	13.0	5.6	5.2
	2016	2020	2016	2020	2016	2019
Social expenditure (% of GDP)	8.3	N/A	11.5	13.6	20.0	19.9

Note: See the Reader’s Guide for definitions and sources.

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