Panama has made significant progress
in reducing poverty in recent years. Between
2007 and 2012, a period including the
Great Recession years, Panama managed to
reduce poverty (using the national poverty
line) from 39.9 percent to 26.2 percent, and
extreme poverty from 15.6 percent to 11.3
percent. Thus, in a population of about 3.6
million people, the number of Panamanians
living below the national extreme poverty
line declined by slightly more than 150,000
people and those living below the overall
poverty line declined by close to half a million
people.
Panama’s progress in reducing poverty
and increasing shared prosperity compares
positively with the Latin American region.
Poverty reduction in the country was greater
than the Latin American and Caribbean (LAC)
average. Only Bolivia saw greater improvement
in shared prosperity, as measured by
the growth of the income of the bottom 40
percent of the population, than Panama. The
rise in the middle class, seen in many countries
in the region, was particularly marked
in Panama and there has been an overall decline
in inequality.
This report takes stock of this progress,
and reflects on the constraints and opportunities
that Panama faces in continuing on its
path of shared prosperity and poverty reduction.
Following a detailed analysis of poverty—
recent trends, drivers of poverty reduction,
and demographic factors—the report provides
elements to answer three main questions. First,
what has driven growth in Panama in recent
years? Second, to what extent has this growth
been, or not been, inclusive? And, finally, how
sustainable is the growth and, more generally,
the development model of Panama?
In doing so, the report identifies a select
list of policy priorities for poverty reduction
and shared prosperity in Panama. The analysis
of the development challenges in any
country, including Panama, will likely find
that there is space for improvement on most
areas underlying development. However, a
long list of recommendations is likely to be
of limited use. Policy makers face budgetary
and political economy constraints that limit
their scope for action. Thus, an effort that
prioritizes among competing policy interventions
will add significant value to any diagnostic
of country development challenges.
Exploiting a diverse set of analytic tools, a
benchmarking exercise and country knowledge,
this report also contributes to Panama’s
policy debate by identifying a select list of
priorities and opportunities.