Economic and Political Overview

flag Panama Panama: Economic and Political Overview

In this page: Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline

 

Economic Indicators

Panama's economy is small, very open, highly diversified, dollar-driven, and highly competitive by regional standards. The country has experienced robust growth over the past 30 years, driven by capital and labour accumulation, resulting in strong job creation and a significant reduction in poverty. GDP grew a solid 7.3% in 2023, driven by construction, transport and storage, wholesale and retail, utilities, business services, and hotels and restaurants. Growth slowed sharply to 2.9% in 2024 due to a halt in copper production and air transport declined, as per official government figures; however, the dynamic services sector should support a gradual recovery in growth over the medium term. The IMF expects growth to pick up to 4% by 2026 on the back of a robust pipeline of public works. The new government led by President Jose Raul Mulino plans to address the copper mine issue in 2025, following social security reform. Potential proposals include an "open-to-close" approach, which would involve temporarily reopening the mine to finance its responsible closure.

The non-financial public sector (NFPS) deficit for 2024 was 7.4% of GDP (USD 6.4 billion). Contributing one-off factors included the settlement of USD 650 million in prior-year arrears (0.8% of GDP) in April and reduced Panama Canal contributions due to a drought (0.3% of GDP). After taking office in July, the Mulino government registered another USD 730 million (0.8% of GDP) in arrears but allocated most of this to the 2023 deficit without specifying the amount for the 2024 deficit. A tax amnesty brought in 0.1% of GDP. The government aims to increase tax collections by 42%, or 2.3% of GDP, through efforts to reduce tax evasion. However, the underlying deficit, excluding these one-off factors, remains high at over 6% of GDP. Therefore, significant consolidation efforts will be needed to meet the revised 4% target for 2025 (Fitch Ratings). Public debt increased to 54.6% in 2024, from 52.4% one year earlier, and is forecast to peak at 55.8% of GDP in 2025 and then gradually decline (IMF). Implementing new structural fiscal reforms, particularly in revenue mobilization, could accelerate this decline. Despite downward pressures on sovereign ratings due to the closure of Cobre Panama, the country maintains good access to financing as a stable dollarized economy. Meanwhile, inflation decreased to 1.5% in 2023 and 0.7% in 2024, driven by lower transport and food prices. It is expected to stabilize at around 2% during the forecasting period.

According to the IMF, Panama has a GDP per capita (PPP) of USD 41,292; however, despite remarkable progress made by the authorities in recent years, Panama remains one of the most unequal countries in the world, with significant poverty in rural areas and among indigenous communities. This inequality stems from unequal labour market opportunities and limited fiscal redistribution. Moreover, slower growth before and during the pandemic led to higher unemployment and informality. After peaking in 2020, unemployment has been gradually declining, averaging 7.1% in 2023. It increased to 9.5% as of October 2024, according to the latest official figures. As per the IMF, attracting FDI, enhancing educational quality, and decreasing informal employment are crucial steps to foster labour productivity and growth.

 
Main Indicators 2023 (E)2024 (E)2025 (E)2026 (E)2027 (E)
GDP (billions USD) 83.3887.3591.7397.31103.23
GDP (Constant Prices, Annual % Change) 7.32.53.04.04.0
GDP per Capita (USD) 18,72619,36920,09221,05822,070
General Government Balance (in % of GDP) -3.0-3.9-3.1-2.2-1.5
General Government Gross Debt (in % of GDP) 52.454.655.855.353.9
Inflation Rate (%) 1.51.32.02.02.0
Unemployment Rate (% of the Labour Force) 7.48.48.07.77.7
Current Account (billions USD) -3.74-0.31-0.42-1.50-2.58
Current Account (in % of GDP) -4.5-0.4-0.5-1.5-2.5

Source: IMF – World Economic Outlook Database , Latest available data

Note: (e) Estimated Data

Main Sectors of Industry

The economy of Panama is primarily driven by the service sector, particularly transportation and logistics linked to the Panama Canal. However, mining, agriculture, and timber also play significant roles. The country has substantial copper reserves, notably the Cobre Panamá mine, though operations have been suspended since November 2023 due to environmental protests and legal challenges, impacting the economy. Additionally, Panama has reserves of gold, manganese, and iron. Hydropower is a major energy source, supplying around 60% of all electricity in the country. Agriculture, while a smaller contributor to the economy, accounts for 2.6% of GDP and employs about 15% of the labour force. Around 29.4% of the country's land is used for farming, with roughly 80% of farmers classified as family farmers. Panama's primary agricultural products include bananas, various vegetables, maize, sugarcane, rice, coffee, watermelons, cocoa beans, pineapples, potatoes, coconuts, soybeans, timber, milk, livestock, and shrimp. Cereal imports for the 2023/24 marketing year (August–July) were estimated at 813,000 tonnes, slightly below the previous year’s level. Imports for 2024/25 are expected to be above average. In June 2024, to meet rising maize demand in the feed industry, the government temporarily removed the 40% import tariff on maize until year-end (data FAO).

The industrial sector is not very developed and contributes 27.8% of GDP, employing 17.5% of the labour force. More than 40% of Panama's land is forest land, so logging is a big industry in the country. The main industrial activities are agribusinesses, sugar refining, apparel manufacturing, petroleum products, chemicals, paper and paper products, printing, furniture, and building. Despite internal diversification, the industrial sector remains highly dependent on imports, relying on foreign equipment and software. Over two-thirds of the inputs used in Panamanian industry are imported. The manufacturing sector as a whole accounts for only 5% of GDP.

Panama's economy is pegged to the dollar and the service industry is the biggest in the country, accounting for 67.3% of Panama’s GDP and employing 67.8% of the workforce. Transport is the most important sector of the service industry, as it comprises the Panama Canal - the government’s chief revenue source. Other well-developed sectors are logistics, banking, the Colón Free Zone (a focal point for foreign investment in the manufacturing industry), insurance, container ports, boat registrations, and tourism. Panama is also an important country for offshore banking services.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 14.7 17.5 67.8
Value Added (in % of GDP) 2.5 27.8 67.3
Value Added (Annual % Change) 0.5 12.8 5.9

Source: World Bank - Latest available data.

 

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Monetary Indicators 20162017201820192020
Panamean Balboa (PAB) - Average Annual Exchange Rate For 1 MUR 0.030.030.030.030.03

Source: World Bank - Latest available data.

 
 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
66,2/100
World Rank:
62
Regional Rank:
10

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

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Foreign Trade in Figures

Panama is mainly export-oriented and highly dependent on trade, which represents 90% of GDP (World Bank, latest data available). The country also has one of the largest trading fleets in the world. In 2023, copper was the primary export, comprising 73.3% of the total, ahead of bananas (4.4%), crustaceans (1.8%), ferrous waste (1.6%), and medicaments (1.6%). The top imports included petroleum oils (18.6%), motor vehicles (6.1%), medicaments (4.4%), telephone sets (1.7%), and food preparations (1.3% - data Comtrade).

In 2023, the country’s main export partners were China (39.1%), Japan (13.1%), South Korea (6.9%), Spain (6.1%), and India (5.2%), whereas imports came chiefly from the United States (18.9%), China (12.1%), Mexico (4.3%), Costa Rica (3.4%), and Colombia (2.9%). 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.

In recent years, Panama’s trade balance has been positive: in 2023, the country recorded a surplus equivalent to 3.4% of its GDP (from 2.5% one year earlier – data World Bank). According to the last available data from WTO, Panama imported USD 35.1 billion worth of goods and USD 5.7 billion in services in 2023. Over the same period, the country exported USD 15.7 billion in goods and USD 18 million in services. When excluding re-exports, the figures are sensibly lower: according to the Ministry of Commerce, Panama closed 2024 with total exports reaching USD 964.3 million, an increase of USD 66.4 million (7.4%) compared to 2023, when exports totalled USD 897.9 million. Bananas were the country’s top export, accounting for 16.3% of total exports in 2024. Frozen shrimp was also a key export, representing 10.4%, driven by the sector’s strong quality and competitiveness. Other notable contributors to export growth included raw cane sugar (4.9%), crude palm oil (4.8%), and fish oils and fats (4.5%).

 
Foreign Trade Indicators 20192020202120222023
Imports of Goods (million USD) 21,49214,74020,59629,24935,095
Exports of Goods (million USD) 11,3189,48313,16115,27815,713
Imports of Services (million USD) 5,1133,2134,1445,5515,727
Exports of Services (million USD) 13,7348,19210,64815,29718,032
Imports of Goods and Services (Annual % Change) -1.8-26.531.524.07.1
Exports of Goods and Services (Annual % Change) 1.1-18.028.022.35.1
Imports of Goods and Services (in % of GDP) 40.232.438.545.643.1
Exports of Goods and Services (in % of GDP) 40.236.341.648.146.5
Trade Balance (million USD) -7,607-2,804-3,479-6,709-11,085
Trade Balance (Including Service) (million USD) 1,0032,1713,0303,038433
Foreign Trade (in % of GDP) 80.468.780.193.789.5

Source: WTO – World Trade Organisation ; World Bank , Latest Available Data

 

Main Partner Countries

Main Customers
(% of Exports)
2023
China 39.1%
Japan 13.1%
South Korea 6.9%
Spain 6.1%
India 5.2%
See More Countries 29.6%
Main Suppliers
(% of Imports)
2023
United States 18.9%
China 12.1%
Mexico 4.3%
Costa Rica 3.4%
Colombia 2.9%
See More Countries 58.3%

Source: Comtrade, Latest Available Data

 
 

Main Products

3.4 bn USD of products exported in 2023
Copper ores and concentratesCopper ores and concentrates 73.3%
Bananas, incl. plantains, fresh or driedBananas, incl. plantains, fresh or dried 4.4%
Crustaceans, whether in shell or not, live, fresh,...Crustaceans, whether in shell or not, live, fresh, chilled, frozen, dried, salted or in brine, even smoked, incl. crustaceans in shell cooked by steaming or by boiling in water; flours, meals and pellets of crustaceans, fit for human consumption 1.8%
Ferrous waste and scrap; remelting scrap ingots of...Ferrous waste and scrap; remelting scrap ingots of iron or steel (excl. slag, scale and other waste from the production of iron or steel; radioactive waste and scrap; fragments of pigs, blocks or other primary forms of pig iron or spiegeleisen) 1.6%
Medicaments consisting of mixed or unmixed...Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses "incl. those in the form of transdermal administration" or in forms or packings for retail sale (excl. goods of heading 3002, 3005 or 3006) 1.6%
See More Products 17.2%
14.5 bn USD of products imported in 2023
Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals (excl. crude); preparations containing >= 70% by weight of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, n.e.s.; waste oils containing mainly petroleum or bituminous minerals 18.6%
Motor cars and other motor vehicles principally...Motor cars and other motor vehicles principally designed for the transport of persons, incl. station wagons and racing cars (excl. motor vehicles of heading 8702) 6.1%
Medicaments consisting of mixed or unmixed...Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses "incl. those in the form of transdermal administration" or in forms or packings for retail sale (excl. goods of heading 3002, 3005 or 3006) 4.4%
Telephone sets, incl. telephones for cellular...Telephone sets, incl. telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, incl. apparatus for communication in a wired or wireless network [such as a local or wide area network]; parts thereof (excl. than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528) 1.7%
Food preparations, n.e.s.Food preparations, n.e.s. 1.3%
See More Products 67.9%

Source: Comtrade, Latest Available Data

 
 

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Main Services

Source: United Nations Statistics Division, Latest Available Data

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Sources of General Economic Information

Ministries
Ministry of Foreign Affairs (in Spanish)
Ministry of Commerce and Industry (in Spanish)
Ministry of Economy and Finance (in Spanish)
Ministry of Government (in Spanish)
Statistical Office
National Institute of Statistics and Census (in Spanish)
Central Bank
National Bank of Panama (in Spanish)
Stock Exchange
Panama Stock Exchange - Bolsa Latinoamericana de Valores (in Spanish)
Search Engines
Google.com.pa
Economic Portals
Panama Canal Authority

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Political Outline

Current Political Leaders
President: José Raúl MULINO Quintero (since 1 July 2024)
Next Election Dates
Presidential and National Assembly: May 2029
Main Political Parties
Panama's political system is based on a multi-party system where parties work together to form coalition governments. The country's major political parties are:

- Realizing Goals (RM): centre-right to right-wing
- Democratic Revolutionary Party (PRD): centre-left, populist, social-democratic
- Democratic Change (CD): centre-right, opposition, works toward continued economic growth and better infrastructure
- Panamenista Party (PP): right-wing, populist, conservative
- Nationalist Republican Liberal Movement (MOLIRENA): centre-right, pro-business, liberal, conservative. Allied with the CD
- Another Way Movement (MOCA): big-tent
- People's Party (PP): centre-right, christian democracy, conservative. Formerly known as Christian Democratic Party or PDC.
Type of State
Panama is a republic based on a parliamentary democracy.
Executive Power
The president is both the chief of state and the head of government. The president and the vice-president are elected by popular vote for a five-year term and are not eligible for consecutive re-election but can run again after a five-year gap. The president appoints the Cabinet and holds executive powers, which include the implementation of laws within the country and overseeing day-to-day governmental affairs.
Legislative Power
The legislature in Panama is unicameral. The parliament, called the National Assembly, has 71 seats. Members are elected by popular vote for five-year terms through a mixed electoral system: 26 members are chosen via single-member constituencies using a first-past-the-post system, and 45 members are elected from multi-member constituencies through proportional representation. The legislature is a branch of power that is equal to and independent of the executive. Legislative power is vested in both the government and the National Assembly.
 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
77/180
 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Free
Political Freedom:
2/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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Latest Update: May 2025