Panama is on track to grow faster than many of its Central American neighbors in 2025. Experts project the country’s economy will expand by 3.7%, compared to 3.6% in Guatemala and 2.2% in El Salvador.
Why Panama Is Growing
The main drivers of this growth are:
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Tourism – More visitors continue to choose Panama for its culture, beaches, and nature.
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Logistics – The Panama Canal and related services remain key.
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Financial services – The banking and finance sector continues to be strong.
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Infrastructure projects – Major public works are creating jobs and boosting activity.
These sectors keep Panama’s economy moving, even after the closure of a large copper mine that slowed things down in 2024.
Big Projects on the Horizon
Looking ahead, several large-scale projects are expected to fuel growth from 2026 onward:
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The fourth bridge over the Canal
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Expansion of the Panama Metro
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A planned train line between Panama City and Chiriquí
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The Río Indio reservoir
These projects are not only aimed at improving transportation and services but also at generating long-term stability for the economy.
Inflation and Household Spending
Inflation in Panama has “normalized,” meaning prices are more stable compared to the past few years. This is good news for families, since stable prices help with planning household expenses.
Still, experts note that household consumption is growing at a slower pace than expected. This is partly due to a labor market that has not fully recovered from the pandemic, with higher unemployment and informal jobs affecting available income.
Regional Context
According to the Economic Commission for Latin America and the Caribbean (ECLAC), Panama’s growth could even reach 4.2%, making it one of the strongest performers in the region – second only to Argentina at 5%. ECLAC highlights that Panama, Guatemala, and the Dominican Republic will show resilience thanks to services, private consumption, and remittances.
Fiscal Perspective
Government finances are also improving. Panama reduced its fiscal deficit from 3.5% of GDP in mid-2024 to 2.1% in mid-2025. The goal is to bring it down to around 4% of GDP for the year, in line with fiscal rules. This gradual improvement helps the country maintain its investment-grade rating with major agencies like Moody’s and Standard & Poor’s.
Investment Outlook
Foreign investment has been slower since the pandemic, but Panama’s removal from international “gray lists” is expected to attract more global capital. A stronger investment flow would benefit many areas of the economy, from infrastructure to services.
Why This Matters
Panama’s steady growth provides a foundation of stability in Central America. A consistent GDP expansion above 3.5% helps generate jobs, strengthen public finances, and create a more attractive environment for business and development. While challenges remain in employment and consumption, the overall direction is positive.
Written on August 24, 2025
