2023 POLICY ROADMAP 
Panama’s economy has been recovering strongly since the pandemic-induced GDP contractions, with growth of 5% expected in 2023, down from 11% the previous year. Inflation stood at just under 2%, fuelled by electricity and import costs.

In the past year the government introduced legislation (Law 256) covering electronic invoices
to support sales, and implementing the Panama Electronic Invoicing System (SFEP). Meanwhile, the government continues to implement Law 186 of 2020, which established “Sociedades de Emprendimiento” to promote innovation and entrepreneurship.

2023 Framework Conditions Review1

Apart from a sharp drop during the pandemic, the overall expert assessment of Panama’s entrepreneurial environment, as summed up by the National Entrepreneurial Context Index (NECI), has been fairly stable over the past five years. The score of 4.2 in 2023 was the same as in 2020, although a touch lower than in 2022 (4.3).

Between 2022 and 2023 there was little change in Panama’s individual Entrepreneurial Framework Condition (EFC) scores, with six of 13 having increased slightly while another six fell slightly. The largest falls were for Government Entrepreneurial Programs (from 4.8 to 4.1) and for Commercial and Professional Infrastructure (5.4 to 4.6), while the largest increase was for Ease of Entry: Market Dynamics, up from 4.0 to 5.4. Panama sits towards the lower end of Level B for EFCs, with eight of its scores below the group average and just three above.

National experts rated Panama a little higher in relation to women entrepreneurs, with a score of
3.7 for social support for those entrepreneurs, well below sufficient but ranked 22nd of 49 participating economies in 2023. Access to resources compared to male entrepreneurs scored higher at 5.4, 12th among the 49 economies.

2023 Entrepreneurial Activity Review

Just over a half of adults in the GEM Adult Population Survey (APS) in Panama reported that their household income had fallen in 2023: a high proportion, but well below the more than seven out of 10 of the previous three years.

Entrepreneurship has a reasonably high social profile in Panama, with around one in two adults knowing someone who has recently started a business, or seeing good conditions to do so locally. Confidence is high, with three in four adults considering they have the skills and experience to start their own business. However, two in five of those seeing good opportunities would not start a business for fear it might fail, although a similar proportion expect to start their own business in the next three years.

Levels of Total early-stage Entrepreneurial Activity (TEA) were high, with 31.1% of adults starting or running their own business in 2023, a share that has been rising steadily over the previous two years (it was 21.8% in 2021 and 27.9% in 2022). Men were slightly more likely than women to be starting businesses. However, the Established Business Ownership rate was just under 5%, implying around six people were starting
or running new businesses for every person owning an established one. This suggests there may be some serious obstacles that prevent new business from enduring long enough to become established.

To earn a living because jobs are scarce was the most popular motivation among those starting new businesses, agreed by more than three out of four, although making a difference in the world was also well supported at two in three. The other two motivations were also agreed by more than a half of those starting new businesses, suggesting that new entrepreneurs agreed with multiple motivations.

Just 14% of new entrepreneurs had customers beyond Panama, while more than three out of four expected to use more digital technologies in the next six months. A relatively high three in 10 new entrepreneurs expected to employ at least another six people over the next five years, although down from the four in 10 of last year.

1 A brief description of the GEM approach is given in the footnote on p. 107.