Panama’s economy has been strong and stable compared to its neighbors for many years, but recent events have raised concerns about its future. Fitch downgraded the country’s credit rating in 2020 due to a range of issues, including fiscal deficits, governance problems, closure of a copper mine, drought affecting canal revenues and tax underperformance.
In March 2010, Panama was granted 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 from that time. The country’s public debt has risen to $47.4 billion by the end of 2023, exceeding 60% of GDP. Critics blame the government’s aggressive borrowing rate which 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.