Economic Overview

Panama's economy is small, very much open, highly diversified, dollar-driven, and highly competitive by regional standards. Before the pandemic, Panama saw significant income growth, with its income compared to the US rising from 33% to 48% over two decades. This was propelled by rapid development fueled by major projects like expanding the Panama Canal and Tocumen airport, along with growth in service and logistics sectors supported by these projects. Panama was hit hard by the pandemic, but the economic recovery has been strong. In 2023, GDP grew by 7.5%, benefiting from high investment particularly in construction. In late 2023, Panama's Supreme Court deemed the new mining contract with copper mine operator Minera unconstitutional, leading the government to declare its intention to shut down the mine. Consequently, GDP growth is forecasted to drop to 2.5% in 2024 before gradually recovering in the medium term (IMF). The anticipated slowdown primarily stems from the closure of Minera, which directly and indirectly accounted for approximately 5% of Panama's GDP.

Since the peak of the pandemic, there has been notable fiscal consolidation. The fiscal deficit of the non-financial public sector decreased from 4% of GDP in 2022 to 3% in 2023. This decline in the deficit-to-GDP ratio was driven by increased revenues, including payments from the copper mine Minera and land sales to the ACP, alongside reduced public investment, although interest payments saw a significant increase. In 2024, the government aims to further reduce the fiscal deficit to 2%, although the target is seen as ambitious by the IMF, considering that the 2024 budget authorizes an increase in spending of 3% of GDP compared to the 2023 outcome. In 2023, gross public debt slightly decreased to 52.8% of GDP and should decrease marginally to 51.4% by 2025 as per the IMF, although increasing deficit budget may reverse the trend. The average inflation rate decreased from 2.9% in 2022 to 1.5% in 2023 and consistently stayed lower than other regional countries. It is estimated to remain at a low level of 2.2% (year-on-year) by the end of 2024 and around 2% in the following years (IMF).

According to the World Bank, Panama has a GDP per capita (PPP) of USD 39,280; however, despite remarkable progress made by the authorities in recent years, income inequality is among the highest in the region and poverty has increased as a result of the COVID-19 pandemic, especially within the most vulnerable groups. Unemployment, which spiked from 7.1% in 2019 to 18.5% in 2020, fell to approximately 8% in 2023 (IMF). For income convergence to persist, there must be a boost in labor productivity growth. In the 25 years before the pandemic, approximately 75% of Panama's income improvement compared to the U.S. stemmed from a rise in the employment-to-population ratio, rather than faster labor productivity growth. However, it's expected that the increase in the employment-to-population ratio will slow down in the future. According to the IMF, attracting FDI, enhancing educational quality, and decreasing informal employment are crucial steps to foster labor productivity and growth.

Foreign Trade

Panama is mainly export-oriented and highly dependent on trade, which represents 87% of GDP (World Bank, latest data available). The country also has one of the largest trading fleets in the world. In 2022, copper and banana exports emerged as the primary export leaders, comprising 76.6% and 3.5% of the total, respectively. Following closely were frozen shrimp exports at 1.6%, crude palm oil at 1.4%, and medicines at 1.3%. The top imports included petroleum oils (20.8%), motor vehicles (4.9%), medicaments (4.2%), petroleum gas (1.8%), telephone sets (1.4%), and maize (1.3% - data Comtrade).

In 2022, the country’s main export partners were China (32.7%), Japan (15.0%), South Korea (7.4%), India (6.5%), Germany (6.4%), and Spain (4.3%), whereas imports came chiefly from the United States (24.2%), China (10.8%), Mexico (4.3%), Costa Rica (3.3%), and Colombia (3% - data Comtrade). The expansion of the canal has more than doubled its capacity, allowing it to accommodate vessels that were originally too wide with the United States and China being the first users of this vessel type. The country has trade agreements with the United States, Mexico, Peru, Canada, Chile, Singapore, Taiwan, and Israel. Panama is also a member of the "Central American Integration System" (or SICA), a regional institution whose main purpose is to promote integration between Central American countries, fostering security, freedom, democracy, and social development within the region. Additionally, Panama is also one of the countries in the Central America-EFTA agreement, as well as the Central America-EU agreement.

According to the last available data from WTO, Panama imported USD 29.2 million worth of goods and USD 5.9 million in services in 2021. Over the same period, the country exported USD 15.2 billion in goods and USD 15.9 million in services. Between January and July 2023, Panama reached its highest export earnings in a seven-month period, totaling USD 2.36 billion. A substantial amount, USD 1.65 billion, stemmed from copper exports.
In contrast to the corresponding period in 2022, total exports have increased by 10.7%, reflecting robust economic expansion across diverse sectors (data Ministry of Commerce and Industries).

COVID-19 Country Response

Travel restrictions

Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.

Import & export restrictions

A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

For the general overview of the key economic policy responses to the COVID-19 pandemic (fiscal, monetary and macroeconomic) undertaken by the government of Panama, please consult the country's dedicated section in the IMF’s Policy Tracker platform.

Support plan for businesses

For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.