Before the outbreak of COVID-19, Panama was one of the countries in Latin America and the Caribbean that had the strongest growth rate. Its growth performance increased at an average rate of 4.7% between 2014 and 2019 before suffering severe damage from the pandemic, leading to its labor income being reduced by 18% in 2020 (Matus et al., 2021). Panama Solidario assisted the country in maintaining its poverty rate at 14.9% instead of the estimated 18.8%, posting a rise from the initial national poverty rate, which was at 12.2% before the crisis (Matus et al., 2021). Panama’s wealth is located mainly among the high-class individuals who live in urban areas, while those who live in rural areas are six times poorer than the richer.
Globally, the unemployment rate increased drastically after the COVID-19 epidemic. Panama’s unemployment rate rose from 7.07% in 2019 to 18.55% in 2020, resulting from the damage imposed by the virus outbreak (O’Neill, 2021). In 2021, it was at 10.17%, a fall from 2020 (O’Neill, 2021). The United States had an unemployment rate of about 8.3% in 2021 (O’Neill, 2021). Comparing the two countries unemployment rates, it is vividly clear that by 2020, Panama had a higher number of the labor force that did not have jobs but were currently looking for work compared to the US. Thus, the US has most of its citizens employed, making Panama worse off.
Panama has its own official currency, known as the Panamanian Balboa. It has equal value to the dollar; in other words, one dollar is equivalent to one Panamanian Balboa. However, they do not print their paper money and instead use the dollar as their currency. This dollar adoption was due to its stability in value compared to the Balboa and its fixed exchange rate with their currency.
Panama has different trade ties with a number of countries across the globe. Its main trading partners are the US, China, Free Zones, and Singapore (Bakari & Mabrouki, 2017). The country has been attractive to foreign investors due to its stable political environment, increasing real estate market, and growing economy (Bakari & Mabrouki, 2017). Panama had a trade deficit worth 5 billion dollars in 2020, showing that the country’s imports were more than its exports. Its exports, expressed as a percentage of the GDP are at 40.74% (Matus et al., 2021). Foreign direct investment is important for a country since it creates job opportunities as investors establish new companies, reducing unemployment.
In relation to the rate of unemployment and inflation in Panama, it is evident that the country has a stable growing economy. Despite the economic shock of 2020 due to the COVID-19 crisis, the country managed to stabilize its economic growth. The Panama currency has assisted in expanding its economy because of its equality with the dollar value. Its service sector has amounted to more than 75% of the GDP, making it rise greatly in recent years, resulting from the increase in the cost of one dollar (Matus et al., 2021). It is strongly trying to revive its economy by increasing its labor force and wages.