Panama has long been known for its strong economy and political stability, but recent events have caused concerns about its future. Despite maintaining a good reputation in the past years, widespread protests, political uncertainty surrounding an upcoming presidential election, and a downgrade in credit rating by Fitch have raised doubts about Panama’s economic future.
In March 2010, Fitch granted Panama an investment grade status due to several factors such as the expansion of the Panama Canal, public investment, and foreign direct investment. However, today’s economic landscape is vastly different from what it was then with issues like fiscal deficits, governance problems, closure of a copper mine and drought affecting canal revenues leading to a downgrade in credit rating.
Critics argue that the government’s aggressive borrowing rate is to blame for rising public debt which reached $47.4 billion by the end of 2023, exceeding 60 percent of GDP. This was during the administration of President Laurentino Cortizo who took office in July 2019. The debt-to-GDP ratio jumped from 44.5 percent at the end of 2019 to 64.7 percent by the end of 2020 as borrowing was used to offset revenue declines during the pandemic.