Panama has experienced remarkable economic growth over the past three decades, although it remains one of the most unequal countries. In 2024, Gross Domestic Product (GDP) grew by 2.9%, reflecting a slowdown due to the suspension of copper operations and the drought that affected Canal traffic. The economy is projected to recover in 2025, with GDP growth of 3.9%, driven by investments in infrastructure and sectors like finance, business services, and logistics. In the medium term, growth is expected to reach 4.1%, fueled by domestic demand and stronger public and private investments.

Rapid economic growth in recent decades led to a significant reduction in poverty, with rates falling from nearly 60% in 1990 to 19.8% in 2024 ($8.3/day, 2021 PPP). However, poverty reduction has recently slowed, with no progress between 2023 and 2024. Inequality remains one of the country’s key challenges: as of 2024, while poverty was 11.4% in urban areas, it reached 39.6% in rural areas.

The fiscal deficit widened to 7.4% of GDP in 2024, with public debt rising to 62.3% of GDP. The current administration has initiated measures to contain spending. Fiscal consolidation is set to resume in 2025 under the Fiscal and Social Responsibility Law, aiming to reduce the deficit to 4% of GDP through spending cuts and increased pension contributions.

Looking ahead, Panama faces the challenge of strengthening fiscal stability, diversifying sources of growth, and making growth more inclusive. A sustained recovery will depend on its ability to boost investment, improve spending efficiency, and promote greater social inclusion. Additionally, the country can further consolidate its position as a regional logistics and financial hub, provided it advances structural reforms and maintains market confidence.

Last Updated: Oct 6, 2025

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