IMF Executive Board Concludes 2025 Article IV Consultation with Panama
IMF News, August 25, 2025
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- Published: August 25, 2025
Economic recovery and recent performance
- The economy is recovering from the impact of the Cobre Panamá mine closure.
- GDP growth slowed from 7.3 percent in 2023 to 2.9 percent in 2024, mainly due to the closure of the Cobre Panamá copper mine.
- The mine directly and indirectly accounted for about 5 percent of GDP and 2 percent of employment.
- Unemployment increased from 7.4 percent in August 2023 to 9.5 percent in October 2024.
- Non-mining GDP growth accelerated in the course of 2024 as the services sector continued its post-pandemic boom.
- Strong capital formation has been driving growth from the expenditure side.
- The Panama Canal returned to operating at full capacity in September 2024 after 2023–24 transit restrictions caused by the El Niño-triggered drought.
- Inflation developments:
- Inflation has declined sharply from its mid-2022 peak.
- 0.2 percent year-on-year at end-2024.
- -0.7 percent year-on-year in May 2025.
- The 2024 fiscal deficit reached 7.4 percent of GDP, up from a revised 3.9 percent of GDP in 2023.
- Taking into account one-off factors, accounting changes and the impact of the economic cycle, the deterioration in the underlying fiscal balance is estimated at 0.8 percentage points of GDP.
Outlook and risks
- Short-term projection:
- GDP growth is projected to increase to 4.5 percent in 2025 as the impact of the mine closure diminishes and non-mine economic sectors continue to grow.
- The staff projection also presents GDP growth as 4½ percent in 2025.
- Medium-term projection:
- GDP growth is projected at about 4 percent per annum over the medium term.
- Key downside risks:
- Loss of investment-grade status.
- Delays in implementing the reform agenda.
- Natural disasters.
- Heightened global policy uncertainty.
- Upside scenario:
- Successful implementation of the government’s ambitious reform package—including ongoing mine negotiations—could bolster the outlook.
- Fiscal consolidation effects:
- Non-mining GDP growth is expected to decelerate due to fiscal consolidation, but overall GDP growth will increase due to base effects.
Fiscal policy, pensions, and public finances
- Directors' assessment of fiscal strategy:
- The government’s fiscal targets embedded in the revised Social and Fiscal Responsibility Law path—to reduce the non‑financial public sector fiscal deficit to 2 percent of GDP by 2029—are considered appropriate.
- Welcomed the spending reduction plan approved by the cabinet to meet the 2025 fiscal target and encouraged its full implementation.
- Revisit of spending mandates and commitments would enhance budget flexibility and capacity to absorb shocks and pursue new priorities.
- Pension reform:
- The pension reform is a welcome adjustment that addresses the financial shortfalls of the defined benefit scheme and improves Panama’s social safety net.
- Further adjustments of the pension system will be needed in the future to ensure long‑term sustainability.
- Public finance summary (selected figures from Table 1):
- Revenue and grants: 19.9 (2022), 20.5 (2023), 18.5 (2024), 20.8 (2025), 21.2 (2026), 21.8 (2027), 22.4 (2028), 22.7 (2029)
- Expenditure: 22.9 (2022), 23.6 (2023), 25.2 (2024), 23.1 (2025), 23.2 (2026)
- Current, including interest: 17.4 (2022), 17.6 (2023), 19.3 (2024), 18.8 (2025), 18.3 (2026), 17.7 (2027), 17.2 (2028), 17.0 (2029), 16.7 (2030)
- Capital: 5.5 (2022), 6.0 (2023), 5.8 (2024), 6.2 (2025)
- Overall balance, excluding ACP: -4.0 (2022), -3.9 (2023), -7.4 (2024), -3.5 (2025), -2.5 (2026), -1.5 (2027)
- Debt of Non-Financial Public Sector: 52.7 (2022), 51.5 (2023), 57.6 (2024), 59.5 (2025), 60.2 (2026), 60.5 (2027), 59.4 (2028), 58.2 (2029)
- External debt: 46.7 (2022), 46.6 (2023), 50.0 (2024), 51.2 (2025), 51.1 (2026), 50.3 (2027), 49.1 (2028), 47.6 (2029)
Financial sector and safeguards
- Banking system assessment:
- The banking system remains sound, well capitalized and liquid.
- Further improvements are needed to the bank resolution framework.
- Welcomed authorities’ consideration of a financial safety net and progress in implementing key recommendations from the 2023 FSAP.
- Continued commitment to implementing effectively the AML/CFT standards is welcomed.
- Financial indicators (selected):
- Private sector credit: 6.4 (2022), 3.9 (2023), 5.0 (2024)
- Broad money: -1.9 (2022), 3.3 (2023), 5.4 (2024)
- Average deposit rate (Percent): 1.8 (2022), 3.8 (2023), 4.3 (2024)
- Average lending rate (Percent): 7.7 (2022), 8.7 (2023), 6.5 (2024)
Social and structural priorities
- Governance and education:
- Directors concurred that further improvements in governance and education are important.
- Addressing income inequality requires targeted interventions in rural areas, focusing on infrastructure and education to reduce disparities with urban regions.
- Data transparency:
- Ongoing efforts to improve the availability of macro‑financial data will support transparency and policy making.
- Directors encouraged the authorities to continue working toward SDDS subscription.
Key statistics and social indicators (Table 1 highlights)
- Population (millions, 2024): 4.5
- Poverty line (percent, 2019): 21.5
- Population growth rate (percent, 2024): 1.3
- Adult literacy rate (percent, 2019): 95.7
- Life expectancy at birth (years, 2022): 76.2
- GDP per capita (US$, 2024): 19,169
- Total unemployment rate (Oct, 2024): 9.5
- IMF Quota (SDR, million): 376.8
- GDP (in millions of US$): 76,523 (2022), 83,382 (2023), 86,260 (2024), 90,566 (2025), 96,072 (2026), 101,913 (2027), 108,110 (2028), 114,683 (2029), 121,655 (2030)
IMF Executive Board conclusion of the 2025 Article IV Consultation with Panama, Press Release No. 25/279, August 25, 2025.
