Panama

Panama is recognized for its rich biodiversity and diverse ecosystems, which include tropical rainforests, cloud forests, and numerous islands in the Atlantic and Pacific Oceans. The country has also experienced sustained economic growth and is an important international logistics hub. However, these benefits coexist with significant social and territorial inequalities.

Although there has been progress in reducing poverty, inequality remains a major problem, especially between urban and rural areas, as well as between the Indigenous population and the rest of the country. A large share of employment is concentrated in low-productivity and highly informal sectors, which limits social mobility and access to social protection.

Access to quality public services—such as education, health, water, and sanitation—remains unequal, affecting rural, Indigenous, and Afro-descendant communities. Women, especially Indigenous women, face greater barriers to accessing education, employment, and basic services, which perpetuates gender gaps and limits the development of their potential.

Two years into José Raúl Mulino’s administration, Panama has made important progress. However, it continues to face challenges associated with a volatile and uncertain international environment, the need to strengthen its fiscal position, and risks stemming from phenomena such as El Niño, which can affect water availability, economic activity, and revenues linked to the Panama Canal.

At the same time, the country possesses significant strengths, including its strategic location, connectivity, and role as a logistics and services hub. Capitalizing on these advantages will require continued efforts to strengthen institutions, improve public sector management, invest in human capital, and promote growth that generates quality jobs and greater opportunities for all.

Last Updated: Oct 6, 2026

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Panama recorded strong economic growth of 4.4 percent in 2025, driven mainly by activities linked to the Canal, trade, logistics, tourism, and financial services. The economy maintained strong momentum during the first half of 2026, with growth estimated at 4.2 percent for the year. Inflation picked up but remained subdued, projected at 2.0 percent in 2026.

Over the medium term (2027-2028), growth is expected to stabilize at around 4.1 percent, underpinned by continued dynamism in the economy’s key sectors.

Poverty, measured at US$8.30 per day (2021 PPP), declined from 19.8 percent in 2024 to 18.6 percent in 2025, supported by economic growth, rising household incomes, and gradual labor market improvements. If the current growth trajectory continues, poverty is projected to fall further to 17.8 percent by 2028. However, progress remains uncertain, particularly in rural areas, where El Niño event could weigh on agricultural output.

Panama’s fiscal consolidation advanced in 2025 and continued into 2026. The fiscal deficit declined from 6.2 percent of GDP in 2024 to 3.7 percent in 2025 and is estimated at 3.5 percent in 2026, supported by reforms aimed at strengthening the fiscal responsibility framework, the pension system, and tax reforms. These measures have strengthened market confidence and improved the sustainability of public finances. Public debt reached 65.6 percent of GDP in 2025 and is projected to begin a gradual downward path in the years ahead.

Looking ahead, Panama faces the challenge of maintaining sustainable growth that translates into poverty reduction, lower inequality, and more quality jobs. Maintaining macroeconomic stability, strengthening productivity, promoting investment, and generating more productive jobs will be key to expanding economic opportunities for the population. The country also holds strategic advantages from its position as a logistics, trade, and services hub, which can continue to underpin its economic development.

Various external factors, including changes in global economic conditions, fuel prices, and the effects of the El Niño phenomenon on key sectors, could influence the economic outlook, though Panama is expected to maintain a solid growth trajectory.

Last Updated: Oct 6, 2026

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In 2024, the World Bank Group’s Board of Directors endorsed the Country Partnership Framework for Panama 2024–2028, which aims to support job creation, promote inclusion, diversify the economy, strengthen human capital, improve basic services, and increase resilience to a range of shocks.

As of September 2026, the International Bank for Reconstruction and Development (IBRD) portfolio totals US$785.12 million across seven projects focused on disaster risk management, Indigenous Peoples’ development, modernization of public financial management, sustainable rural development and biodiversity conservation, carbon market development, fiscal management, and modernization of the cadastral system, complemented by technical assistance.

As of August 31, 2026, the International Finance Corporation (IFC) portfolio totals US$500 million, allocated to projects supporting access to housing, financial inclusion for women-led businesses, green finance, and infrastructure linked to the Panama Canal, as well as initiatives to expand trade finance and support public-private partnerships.

The Multilateral Investment Guarantee Agency (MIGA) portfolio totals US$1.6 billion across four projects supporting fiscal management and growth, as well as access to financing for housing and for micro, small, and medium-sized enterprises, with a focus on women-led households and businesses.

Over the past five years, the World Bank Group has supported key advances in Panama aimed at strengthening the country’s human capital, resilience, and institutional capacity. These include strengthening the health system through supplies and equipment for intensive care units and laboratories, supporting immunization programs and expanding telemedicine services, as well as developing the Risk Management Policy.

In addition, it has supported initiatives to expand access to finance and housing, promote financial inclusion, mobilize private investment, and strengthen strategic infrastructure. Together, these actions help improve productivity, boost economic activity, and expand opportunities for Panamanian people and businesses.

Last Updated: Oct 6, 2026

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The Country Partnership Framework (CPF) for 2024–28 between Panama and the World Bank Group outlines a collaborative strategy aimed at promoting inclusive, resilient, and sustainable growth. It focuses on three primary objectives:

1. Inclusive Job Creation: This involves improving access to finance for women and small and medium-sized enterprises (SMEs), promoting sustainable tourism, and supporting agribusiness.
2. Strengthening Human Capital and Basic Services: The CPF prioritizes health, education, and water services, particularly for vulnerable populations.
3. Enhancing Resilience to Natural Disasters and Climate Change: This goal encompasses the sustainable management of natural resources and improved institutional preparedness.

Two cross-cutting pillars support the framework: institutional strengthening and social inclusion.

The CPF is grounded in the 2023 Systematic Country Diagnostic, which identifies key structural challenges such as low productivity, inequality, high informality, and vulnerability to climate change. The World Bank Group aims to focus its support on areas where it has a comparative advantage, facilitating collaborative solutions among the World Bank, the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA). Additionally, the strategy includes enhancing public investment management, fostering public-private partnerships, and implementing more effective social protection mechanisms.

You can download the CPF here

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