From Investment Grade to Financial Uncertainty: Panama’s Economic Future in Question

Panama has been known for its strong economy and political stability, but recent events have raised concerns about its economic future. In March 2010, the country was granted an investment grade status by Fitch due to factors such as the expansion of the Panama Canal, public investment, and foreign direct investment. However, today’s economic landscape is vastly different from that of a decade ago. Fiscal deficits, governance issues, the closure of a copper mine, and drought affecting canal revenues have led to a downgrade in credit rating.

By the end of 2023, Panama’s public debt had risen to $47.4 billion, which is more than 60 percent of GDP. Critics argue that the government’s aggressive borrowing rate escalated under President Laurentino Cortizo’s administration that took office in July 2019. The debt-to-GDP ratio surged from 44.5 percent at the end of 2019 to 64.7 percent by the end of 2020, with borrowing used to offset revenue declines during the pandemic. These issues have raised concerns about Panama’s economic future and its ability to maintain its stability in comparison to neighboring countries.