Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Panama's economy is small, very much open, highly diversified, dollar driven and highly competitive by regional standards. In 2022, the country had an estimated growth in GDP of 7.5%, mainly driven by a significant upturn in tourism, and an increase of investment in infrastructure and transportation, which stimulated employment and boosted private consumption. The Panamanian economy is expected to continue recovering in the coming years, albeit at a slower pace, with the IMF predicting a GDP growth of 4% for 2023 and 4.5% for 2024.

In 2022, gross public debt slightly decreased to 55.6% of GDP and, with the country experiencing ongoing fiscal improvement and economic recovery, a gradual debt decrease is expected in the coming years. According to the IMF, the gross government debt is expected to decrease to 55.1% in 2023 and 53.9% in 2024. Fiscal deficit reached 3.7% of GDP in 2022, and should continue decreasing in 2023 and 2024, reaching 2.8% and 1.9%, respectively. Although the current account has a structural deficit, it had been declining. In 2022, it represented -3.7% of GDP, a rate that's expected to decrease to -3.3% in 2023 and -3% in 2024. The external debt is sustainable, with more than 50% held by the banking system. A sovereign wealth fund and banks' foreign currency assets mitigate liquidity risks. In 2022, inflation increased to 3.9%, but this rate is expected to drop to 3.3% in 2023 and 2.5% in 2024. The country is known as a tax haven, and has recently improved the banking regulation system, especially transparency and cooperation with the legal authorities. However, the Panama Papers scandal has shown that banking regulation remains insufficient. In addition, the banking sector is highly exposed to the regional slowdown and strength of the USD, which can affect internal consumption and investment. Two economic drivers, namely real estate and construction, could be particularly affected: given the weight of foreign demand in these sectors, there is concern about potential losses for developers in the event of demand falling as we observe an excess of supply in real estate and high-end tourism. Although the pandemic has significantly impacted the Panamanian economy, the fiscal measures implemented by the government have been effective in boosting economic activity, which has been gradually recovering.

According to the World Bank, Panama has the 17th highest GDP per capita in Latin America & Caribbean, at around USD 14,617. 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 most vulnerable groups. When it comes to children, poverty is much higher than average, as more than half the country's children are poor, and almost a fifth suffer malnutrition. Although unemployment has been rising since 2012, the country experienced a significant decrease of unemployment rates in 2022, due to the Panama's steady recovery following the initial impact of the COVID-19 pandemic. Still, it's worth noting that the informal sector employs more than 40% of the labour force. In 2022, unemployment reached 9.5% of the population, and it should continue stable in the coming years, with rates expected to reach 10% in 2023 and 2024.

Any Comment About This Content? Report It to Us.