Panama Deficit Falls to 2.78% as Growth Forecast Rises
PANAMA · ECONOMY
Key Facts
- —The country Panama, a canal, a banking centre and a country that uses the US dollar as its cash.
- —What happened The finance minister set out the state of the books to investors last week.
- —The growth figure in the headlines 4.4% for 2026. It is a United Nations forecast, not something that has happened yet.
- —What has actually been measured The economy grew 4.8% in the first quarter, on the statistics office’s own count.
- —The deficit 2,642 million balboas through July, about US$2.64 billion, or 2.78% of the economy.
- —Why that matters It was 3.27% a year earlier, and the ratings agencies are watching.
Panama cannot devalue its way out of trouble, because its currency is the US dollar. That leaves the budget doing all the work, and the budget is improving.
Panama’s finance minister told investors last week that the deficit has come down and growth is holding. One of those two claims is a measurement and the other is a forecast.
What the Minister Said
Felipe Chapman, who runs the economy and finance ministry, spoke at the Latinex investor forum. The ministry released his figures on 11 September.
The fiscal number is the ministry’s own. Through July the non-financial public sector deficit stood at 2,642 million balboas, about US$2.64 billion.
That equals 2.78% of the economy. In the same seven months of 2025 it was 3.27%.
Half a percentage point in a year is a real improvement. It is also the part of the presentation that rests on Panamanian records.
Where 4.4% Comes From
The growth figure is a different kind of number. It is a projection by the United Nations Economic Commission for Latin America and the Caribbean.
The commission revised Panama up from 4.0% to 4.4% for this year, and expects 4.6% next year.
A minister quoting a favourable forecast to investors is ordinary practice everywhere.
The measured figure sits alongside it and is slightly better. The statistics office recorded 4.8% growth in the first quarter, published on 16 June.
Second-quarter national accounts have not appeared. Monthly activity ran at 8.23% in June and 5.19% in May, which are volatile readings rather than quarterly output.
Why Panama Is Judged Differently
Panama uses the United States dollar as circulating currency, alongside the balboa at par. It has done so since 1904.
That removes the variable that dominates analysis of Argentina or Bolivia. There is no exchange rate to collapse and no devaluation to fear.
It also removes an escape route. A government that cannot devalue has to close a gap through spending and taxes alone.
Panama has no central bank issuing its own money either. Interest rates arrive from outside, set in Washington.
The deficit is therefore the main lever the Panamanian state actually controls, which is why the ratings agencies watch it so closely.
What the Canal Contributes
The canal is the other reason Panama is read differently. It hands the treasury a large, reliable transfer every year.
That income is priced in dollars and earned from world trade rather than from Panamanian consumers.
It cushions the public accounts, and it also ties them to global shipping volumes the government does not control.
Drought years, which lower the water available for lockages, show up in the budget as well as in the news.
The Rating Question
Panama lost its investment-grade rating from one of the three major agencies in 2024, and the others have kept it under review.
A move from 3.27% to 2.78% of output is the direction those agencies look for. Seven months is not a year.
The next test is the 2027 budget, still before the National Assembly, which totals US$35.1 billion.
For a foreign investor, Panama is one of the few Latin American economies where the currency is not the risk. The public accounts are.
More: Panama news and analysis, every day from The Rio Times.
Frequently Asked Questions
Did Panama grow 4.4%?
Not yet. That is a forecast from the UN economic commission for the region, quoted by the finance minister.
What growth has been measured?
4.8% in the first quarter of 2026, published by the statistics office on 16 June.
What is the deficit?
2,642 million balboas through July, about US$2.64 billion, equal to 2.78% of output.
Is that better than last year?
Yes. The same period of 2025 recorded 3.27%.
Does Panama use the dollar?
Yes. The US dollar is legal tender alongside the balboa, which is pegged at par.
Why does the deficit matter so much?
Panama cannot devalue and has no central bank of its own, so the budget carries the whole adjustment.
Sources: Ministerio de Economía y Finanzas, Instituto Nacional de Estadística y Censo, CEPAL, La Prensa Panamá.
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