By 
Washington, DC – August 25, 2025: The Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for Panama. The authorities have consented to the publication of the Staff Report prepared for this consultation.
GDP growth slowed from 7.3 percent in 2023 to 2.9 percent in 2024, mainly due to the closure of the Cobre Panamá copper mine. The mine directly and indirectly accounted for about 5 percent of GDP and 2 percent of employment. Unemployment increased from 7.4 percent in August 2023 to 9.5 percent in October 2024.
However, spill-overs to the rest of the economy appear to have been limited. Non-mining GDP growth accelerated in the course of 2024 as the services sector continued its post-pandemic boom. From the expenditure side, strong capital formation has been driving growth. Following the 2023-24 transit restrictions caused by the El Niño-triggered drought, the Panama Canal returned to operating at full capacity in September 2024. Inflation has declined sharply from its mid-2022 peak, to 0.2 percent year-on-year at end-2024, and has since turned negative, reaching -0.7 percent year-on-year in May 2025.
Despite prompt corrective measures by the government that came into office in July 2024, the 2024 fiscal deficit reached 7.4 percent of GDP, up from a revised 3.9 percent of GDP in 2023. Taking into account one-off factors, accounting changes and the impact of the economic cycle, the deterioration in the underlying fiscal balance is estimated at 0.8 percentage points of GDP.
The economy is expected to continue its recovery, but the outlook is subject to significant downside risks and a high degree of uncertainty. GDP growth is projected to increase to 4½ percent in 2025 as the impact of the mine closure dissipates. Non-mining GDP growth is expected to decelerate due to fiscal consolidation, but overall GDP growth will increase due to base effects.
Over the medium term, GDP growth is projected at about 4 percent per annum. This is lower than during the pre-pandemic boom years, as the construction sector and associated FDI inflows are unlikely to provide a similar contribution as during those years, and growth in the employment to population ratio is expected to slow.
Downside risks to the outlook include the loss of investment-grade status, delays in implementing the reform agenda, natural disasters, and heightened global policy uncertainty. On the upside, successful implementation of the government’s ambitious reform package, including on-going mine negotiations—could bolster the outlook.
