Panama’s Economic Outlook 2025: Investment Grade and Key Opportunities for Investors
Panama, the logistical and financial heart of America, continues to be a fundamental point of interest for international entrepreneurs and investors looking to expand their horizons or establish a new tax residency. In a dynamic global environment, a country’s economic stability is a crucial pillar for any investment or relocation decision. In this regard, recent news regarding the maintenance of Panama’s investment grade and the improved risk perception offer a panorama of cautious optimism for 2025 and beyond.
This article breaks down Panama’s economic outlook for 2025, analyzing the strengths that have sustained its growth, the challenges that persist, and the latent opportunities that make it an attractive destination. Understanding these factors is essential for those considering Panama as their next home or business hub.
Panama’s Economic Strength: A Detailed Analysis for 2025
The Panamanian economy has demonstrated remarkable resilience, which has been reflected in positive decisions by risk rating agencies. Moody’s recent confirmation to maintain Panama’s investment grade is a strong signal to the international market, confirming confidence in the country’s ability to meet its financial obligations.
Furthermore, Panamanian bonds have improved their position within the Emerging Markets Bond Index (EMBI), climbing from 9th to 7th place among the safest in Latin America. This advancement is not only an indicator of confidence for investors but can also translate into lower financing costs for the state and companies, further boosting economic development.
Key Indicators and Economic Resilience
With a growth outlook exceeding 4% for 2025, the Panamanian economy is on track to recover and surpass pre-pandemic activity levels. Rafael Sayagués, managing partner of Deloitte for the Central America, Panama, and Dominican Republic Marketplace, highlights that Moody’s decision reflects an economy that, after growing more than 7% in previous years, adapted to 2.9% last year, with solid aspirations to reach 4% in the coming year.
“Moody’s decision reflects the resilience of the Panamanian economy, which in recent years went from growth exceeding 7% to 2.9% last year, with aspirations to reach 4% in 2025.” – Rafael Sayagués, Deloitte.
For investors and entrepreneurs, this resilience and growth forecast are favorable indicators suggesting a conducive environment for business development and wealth generation in Panama.
Outstanding Challenges: Beyond the Investment Grade
Despite the good news regarding Panama’s investment grade, Moody’s negative outlook reminds us that crucial tasks remain pending. These challenges, if not decisively addressed, could mitigate the positive impact of credit stability and affect the long-term competitiveness of the Panamanian economy.
The main challenges identified include:
- Unemployment and Informality: Affecting a significant portion of the economically active population.
- Low Tax Collection: A factor that limits the government’s ability to invest and reduce debt.
- High State Spending: Contributing to budgetary rigidity and hindering effective fiscal consolidation.
Fiscal Consolidation and Budgetary Rigidities
Moody’s has been clear: risks to the fiscal consolidation process persist, primarily due to budgetary rigidity and low revenue collection. Although authorities have managed to reduce the fiscal deficit for 2025, additional government actions are required to achieve faster and more effective consolidation that reverses the growing debt trend. This is fundamental to ensuring the country’s long-term financial health.
The debate on how to increase collection is vital. While some suggest a tax reform, experts like Rafael Sayagués of Deloitte believe that implementing a tax adjustment at this time could burden the same percentage of the economically active population. Instead, actions should focus on increasing job creation and reducing informality, which borders on 50% of the population.
The Impact of the Labor Market and Domestic Consumption
Informality not only affects the tax base but also the quality of life and consumption. René Quevedo, a labor expert, points out that the Panamanian economy has faced a sharp contraction in consumption, especially in the Panama and West Panama regions. This contraction translates into job losses and a significant decrease in the wage bill, directly impacting domestic demand and overall economic growth.
“It is essential at this time that public policies seek the inclusion of entrepreneurs, small businesses, micro-entrepreneurs, and professionals, because that will help reduce the fiscal deficit and increase the tax base.” – Rafael Sayagués, Deloitte.
For those looking to understand taxes in Panama or start a business, the evolution of these policies is key. The generation of formal jobs not only improves the quality of life but also strengthens the tax base, contributing to economic stability and a more predictable environment for investors in Panama.
The Path Towards a Better Outlook: Private Sector Views
The private sector plays a fundamental role in shaping Panama’s economic outlook. Gabriel Diez, president of the National Council of Private Enterprise (Conep), underscores the importance of maintaining the investment grade but also emphasizes that the negative outlook is due to the need to resolve structural issues, such as those related to the mining company, and persistent fiscal challenges.
Diez highlights a clear path to improve the country’s outlook:
- Resolving the mining situation sustainably.
- Controlling the fiscal deficit, reducing it, and complying with the limits of the Fiscal Responsibility Law.
- Generating formal employment, which in turn boosts economic activity and the tax base.
These actions will not only strengthen Panama’s fiscal position but also create a more dynamic and fair environment for investment and business development. For those looking to start a company in Panama, a stable and transparent business framework is a decisive factor.
Panama in the International Context: Lists, Alliances, and Opportunities
Beyond internal challenges, Panama’s position on the global stage is crucial for its economic outlook for 2025. Two aspects stand out: the need to exit discriminatory lists and the maintenance of key strategic relationships.
The Fight Against Discriminatory Lists
Panama has been actively working to be excluded from any discriminatory list, such as the European Union’s (EU) list of non-cooperative jurisdictions for tax purposes. Rafael Sayagués of Deloitte points out that other jurisdictions that were in a similar situation, such as Hong Kong, Uruguay, and Costa Rica, have already managed to exit, suggesting a viable path for Panama.
The Panamanian government has reiterated its commitment to its territorial tax system, which is a major attraction for tax residency in Panama, but has also expressed its plan to modernize it to align with international standards. This balance is fundamental to maintaining its appeal while meeting global expectations for transparency and fiscal cooperation.
Strategic Relations and Their Impact
Maintaining a stable and strong relationship with the United States is another strategic priority for the region and, particularly, for Panama. This relationship is vital for trade, investment, and financial stability. Progress in this area contributes to consolidating Panama’s image as a reliable and strategic partner in the hemisphere.
Investment in Human Capital: The Future of the Educational Model
For Panama’s economic outlook for 2025 to fully materialize, a significant evolution in its educational system is essential. The Deloitte executive emphasizes the need to train the population in new trade models and in the implementation of emerging technologies such as artificial intelligence.
Investors and companies seek regions with qualified talent to establish their operation and manufacturing centers. In the case of Panama, whose service sector is preponderant, the capacity of its personnel is key to its smooth functioning. The proposal to focus on short careers and agile training programs can be a crucial differentiator to attract investment and foster the development of a competitive workforce.
By investing in human capital, Panama not only improves the quality of life of its citizens but also positions itself as a more attractive destination for foreign direct investment, which in turn drives long-term economic growth.
Panama 2025: A Horizon of Sustainable Growth
The projections from multilateral organizations are unanimous: Panama will resume a growth rate above the regional average in 2025 and beyond. The World Bank estimates 3.9% growth, while ECLAC projects 4.1% for 2025 and 4.2% for 2026. These figures, supported by the recovery of logistics activity, financial services, and infrastructure projects, place Panama among the most dynamic countries in Central America.
The Inter-American Development Bank (IDB) also highlights Panama as one of the economies with the best post-pandemic trajectory, with performance that has remained close to 4% annually. These forecasts consolidate a consensus on the country’s potential for recovery and growth, despite fiscal challenges and the impact of regional slowdown.
“Panama has the potential to return to the growth it registered before the pandemic. Important decisions must be made, coupled with the Panama Canal projects exceeding 8 billion dollars, as well as the impetus that must be given to traditional sectors such as tourism.” – Rafael Sayagués, Deloitte.
The combination of a solid investment grade, a positive growth outlook, and an ongoing reform agenda makes Panama a country with great potential for investors and for those seeking a stable tax residency.
Conclusion: Panama, a Strategic Destination with a Future-Oriented Perspective
Panama’s economic outlook for 2025 presents a dual picture: a solid foundation and projected growth that inspire confidence, but also persistent challenges that require attention and decisive action. The reaffirmation of the investment grade by Moody’s and the improvement in the EMBI are testaments to the country’s resilience and potential.
For international entrepreneurs and investors, Panama remains an attractive destination, not only for its geographical position and territorial tax system but also for the commitment of its leaders and the private sector to address outstanding challenges. The key lies in transforming these challenges into opportunities, boosting formal employment, modernizing the economy, and strengthening its position on the global stage.
If you are considering Panama to establish your tax residency or to expand your business operations, expert advice is essential. At Panamaway.com, we guide you through every step of the process, from obtaining your residency to setting up your company. Don’t let complexities stop you; explore the vast opportunities Panama has to offer.