Panama, despite its geographic proximity to countries with tumultuous political and economic situations, has maintained a stable economy and government over the years. However, recent events such as widespread protests, uncertainty surrounding an upcoming presidential election, and a downgrade in credit rating by Fitch have raised concerns about the country’s economic future.
In March 2010, Panama 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, the current economic landscape is vastly different with fiscal deficits, governance issues, closure of a copper mine, drought affecting canal revenues, and tax underperformance leading to the downgrade in credit rating.
By the end of 2023, Panama’s public debt had risen to $47.4 billion, exceeding 60 percent of GDP. Critics blame the government’s aggressive borrowing rate that 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.
