The economy of Panama is a fully dollarized free market economy with a history of low inflation. It is based mainly on the services industry, heavily weighted toward banking, commerce, and tourism.

Panama’s economy is based primarily on a well-developed services sector that accounts for nearly 80% of its GDP. Services include the Panama Canal, banking, the Colón Free Trade Zone, insurance, container ports, and flagship registry, medical and health, and other business.

The country’s industry includes, manufacturing of aircraft spare parts, cements, drinks, adhesives, and textiles. The leading exports for Panama are bananas, shrimp, sugar, coffee, and clothing.

Like most countries in the region, Panama is feeling the impact of the global financial crisis, which threatens to undermine the social gains made in the past few years.

The hand-over of the canal and military installations by the US has given rise to new construction projects. The expansion project of the Panama Canal, combined with the conclusion of a free trade agreement with the United States, is expected to boost and extend economic expansion for some time.

Despite Panama’s status as an upper-middle income nation — as measured by per capita GDP — it remains a country of stark contrasts. Perpetuated by dramatic educational disparities, about 30% of Panama’s population still live in poverty, though this number has dropped by 10 percentage points since 2006.