30.05.2026
Panama’s economy recovered in 2025 after the disruption caused by the closure of the Cobre Panamá mine and the earlier Panama Canal drought. Growth was supported mainly by services, logistics, transport, retail and financial intermediation, while exports benefited from the normalisation of Canal operations and authorised copper concentrate shipments. Growth is expected to remain close to 4% in 2026–2027, but the outlook depends on fiscal consolidation, investor confidence, global trade conditions and Canal-related climate risks. Inflation remains very low, while public debt is expected to stabilise around 65% of GDP after a sharp fiscal adjustment in 2025.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 4.4 | 3.9 | 4.1 |
| Inflation (%, yoy) | 0.9 | 1.5 | 1.6 |
| Employment rate (% of working-age population, 15+) | 58.2 | 58.3 | 58.4 |
| Fiscal balance (% of GDP) | -3.7 | -3.5 | -3.0 |
| Gross public debt (% of GDP) | 65.6 | 65.3 | 64.9 |
| Current account balance (% of GDP) | 0.8 | -0.9 | -0.7 |
Growth recovers after the mining and Canal shocks
Panama’s real GDP growth recovered to 4.4% in 2025, after slowing sharply in 2024 following the Cobre Panamá mine closure and disruptions to Canal traffic caused by drought. The 2025 recovery was led by services, especially retail, transport, logistics and financial intermediation, while exports improved as Canal operations returned to normal.
Growth is projected to ease to 3.9% in 2026 before rising to 4.1% in 2027. The medium-term outlook remains positive, but lower than during Panama’s pre-pandemic boom years. Growth should be supported by finance, logistics, Canal-related transport, construction normalisation and private investment, while copper mining is not assumed to restart over the forecast horizon.
Inflation remains very low
Inflation remained subdued in 2025, at around 0.9%, reflecting weak price pressures, dollarisation and lower imported inflation. Inflation is projected to rise moderately to 1.5% in 2026 and 1.6% in 2027, but remain low by regional standards.
The main inflation risks come from higher oil prices, freight costs and imported food prices. As a dollarised economy, Panama benefits from a strong nominal anchor, but it cannot use exchange-rate adjustment to absorb external shocks.
Fiscal consolidation strengthens
Panama achieved a sharp fiscal adjustment in 2025. The non-financial public sector deficit narrowed from 7.4% of GDP in 2024 to 3.7% in 2025, below the 4% target under the Fiscal Responsibility Law. The adjustment was supported by stronger tax enforcement, higher Canal-related revenues, a wage freeze, postponed capital spending and pension reform.
The fiscal deficit is projected to narrow further to 3.5% of GDP in 2026 and 3.0% in 2027. Public debt is expected to stabilise around 65% of GDP, after rising during the post-pandemic period and the 2024 fiscal deterioration. Continued revenue reforms, spending efficiency and credible medium-term consolidation will be important for restoring investor confidence.
External position shifts back to modest deficit
Panama recorded a current account surplus of 0.8% of GDP in 2025, supported by logistics and transport services, improved Canal operations and authorised copper concentrate exports. Foreign direct investment remained an important source of external financing, although reinvested earnings and investment weakened compared with earlier years.
The current account is projected to return to a modest deficit in 2026–2027, mainly due to debt-service payments and stronger import demand. Panama’s external position remains exposed to global trade flows, Canal traffic, oil prices, financing conditions and potential climate shocks affecting water availability for Canal operations.
Overall outlook
Panama’s outlook remains positive, with growth expected to stay close to 4% in 2026–2027. Inflation should remain low, while fiscal consolidation is expected to gradually reduce the deficit and stabilise public debt. The main risks are weaker global trade, climate-related constraints on Canal operations, tighter financing conditions, lower investor confidence and delays in implementing fiscal and pension reforms. Sustained progress will depend on stronger revenue mobilisation, efficient public spending, investment-climate reforms and policies that support productivity and inclusion beyond the Canal and logistics sectors.
Sources:
World Bank, Panama Macro Poverty Outlook, April 2026.
International Monetary Fund, Panama: 2025 Article IV Consultation and Staff Report, August 2025.
International Monetary Fund, World Economic Outlook, April 2026.
Ministry of Economy and Finance of Panama, Fiscal Responsibility Law and Public Finance Data, 2025–2026.
National Institute of Statistics and Census of Panama, National Accounts and Labour Market Statistics, 2025–2026.
