Panama has been one of the most stable economies and politically in the region compared to neighboring countries. However, recent events have raised concerns about its economic future. These events include widespread protests, political uncertainty surrounding an upcoming presidential election, and a downgrade in credit rating by Fitch.
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 different from what it was a decade ago 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, which exceeded 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.
The rising public debt levels have led to growing concerns about Panama’s ability to meet its financial obligations in the future. Additionally, there are fears that this could impact its ability to attract foreign investment and maintain political stability.
Despite these challenges, however