Panama’s Economy Today (2024)
Last Updated on August 16, 2025 by Retire in Panama
Panama, a player in the world’s economy due to its prime location and the presence of the Panama Canal, has encountered notable economic hurdles in recent times. Despite these challenges, the nation has shown resilience by implementing strategies to stabilize and enhance its standing. In 2024, Panama’s economic landscape reflects the aftermath of events from 2023, such as the issues faced by the Panama Canal and the closure of the First Quantum Mining project.
Challenges Faced by the Panama Canal in 2023
The Panama Canal, a route for maritime trade, experienced significant difficulties in 2023. Extended periods of drought resulted in low water levels, significantly impacting canal operations. As freshwater lakes are crucial for functioning, authorities have had to enforce draft restrictions and limit transit numbers due to the droughts. These measures led to delays and increased shipping expenses, disrupting supply chains and decreasing canal revenue.
The Panamanian government and the Panama Canal Authority (ACP) have been exploring lasting solutions, like investing in water management infrastructure and seeking alternative water sources to lessen drought impacts. The administrator of the Panama Canal announced recently that a major construction project worth billions is set to be finished within six years. This new water reservoir, known as the Indio River Reservoir project, is designed to support the passage of up to 36 ships. It will be connected to the system of man-made lakes, ensuring navigation through the canal and serving as a water source for human use.
No, the Panama Canal is Not Running Dry.
Earlier this year, the mainstream media generated considerable buzz and exaggeration about drought conditions affecting traffic through the Panama Canal. But is the situation really as dire as they suggest? The fact was that sailing was reduced by almost 1/2 by mid-2023. Still, in all actuality, canal revenues for 2023 were 14.9% higher than in 2022, and total tonnage crossing the canal in 2023 increased over 2022. Source.
In response to these alarming reports, US government stakeholders requested that the Global Water Security Center investigate the situation, provide historical context, and determine the accuracy of the media’s claims. Overall, their findings did not entirely align with the media’s portrayal. (We are not surprised). You can read this article HERE.
The Closing of the First Quantum Mining Project.
In 2023, Panama’s mining industry encountered a setback when the Cobre Panama mine, operated by First Quantum Minerals, was shut down. The government mandated the halt of operations due to regulatory issues resulting in economic consequences. This mine, known as one of the world’s largest copper mines, played a role in Panama’s economy by contributing substantially to its GDP and providing many jobs. The shutdown led to job cuts, reduced export earnings, and increased economic uncertainty.
The closure of the mine was proceeded by four weeks of protests in Panama and the shutdown of the Panamerican Highway, which basically closed the country. This led to the Supreme Court of Panama deciding that the contract with the mine was unconstitutional and that the mine must close.
The Cobre mine was generating as much as 3% of Panama’s GDP in 2021, so of course, mainstream media headlines were saying that this would be devastating to Panama’s economy and would damage Panama for many years. More mainstream media exaggeration. (We should be used to that by now)
Panama’s GDP Growth
To fully understand Panama’s GDP growth in 2024 and where it is at, we have to look over the past five years.
In the last five years, Panama has gone through economic ups and downs due to global events and local changes. Being heavily dependent on trade and services, Panama’s GDP growth has been influenced by the expansion and contraction of sectors. Let’s delve into the patterns and important factors that have impacted Panama’s GDP growth from 2019 to 2023 to better understand where we are currently in 2024.
2019: Consistent Growth and Positive Economic Outlook
In 2019, Panama’s economy continued its progress with a GDP growth rate of around 3.3%. The completion of the Panama Canal expansion in previous years boosted trade activities, leading to increased investments in logistics, tourism, and infrastructure. The government focused on diversifying the economy and improving the business environment, attracting investments (FDI). The financial sector also showed resilience contributing to stability.
2020; The Disruption Caused by the COVID-19 Pandemic.
The COVID-19 pandemic abruptly halted Panama’s advancement. In 2020, there was a contraction in GDP by 17.9%, marking one of the most severe recessions in the country’s history. Key sectors like tourism, construction, and retail were hit hard by the impact. Lockdowns and travel restrictions resulted in a decline in tourism earnings. At the same time, construction projects faced delays or were put on hold. The government responded with financial aid packages, social programs, and support for businesses, though the economic impact was severe.
Progress in 2021
Panama’s economy showed signs of a massive recovery in 2021, with a GDP growth rate of 15.3%. The lifting of restrictions and the revival of international trade and tourism all contributed to this improvement. The logistics and transportation industries benefited from increased trade activity, while government initiatives to jumpstart infrastructure projects also played a role.
Strong Recovery in 2022
Panama’s recovery continued to accelerate in 2022, with GDP growth reaching about 9.5%. The reopening of borders and a surge in trade positively impacted canal operations and related services. Tourism experienced a resurgence as international travel picked up, bolstering revenues in the hospitality and retail sectors. Both public and private investments drove growth in the construction sector. Additionally, the financial services industry remained robust by attracting investment (FDI).
Steady Growth in 2023, although a year with challenges, as noted above.
In 2023, Panama’s economy continued to stabilize with a GDP growth rate of around 7.3%. The nation concentrated on strengthening its comeback by broadening its foundation and allocating resources to areas like technology, education, and healthcare. Steps were taken to enhance water management and tackle issues impacting the Panama Canal. The stabilization of inflation rates and unemployment played a role in creating a better economic climate.
In 2024, Panama’s GDP is projected to be 87.4 billion, which could be as high as 5% growth over 2023. GDP has several projections, which are lower than in previous years, because of the closure of the mine.
Inflation in Panama
Panama’s inflation rate over the last five years has been well under control, as opposed to most of the world, and is among the lowest in the Americas. In July 2024, the inflation rate was 1.74% over last year. The inflation rate peaked in 2022 at 3%, but its 10-year average has been below 1.5%. Source: statista.com
Many expats living in Panama complain about inflation, but that is usually because they cannot live without their US-imported produce, so they are experiencing inflation from North America.
In conclusion, Panama’s economy in 2024 is navigating a landscape marked by difficulties and ongoing recovery efforts. The operational challenges of the Panama Canal and the closure of First Quantum Mining highlight the importance of resilience and adaptation in sectors.
A new government, which began its five-year term on July 1st this year, has many plans to tackle the economy and has already rolled out some of its ideas already. While there has been some growth and efforts to tackle economic pressures, strategic investments, partnerships, and policy actions will play a vital role in maintaining lasting economic stability and progress in Panama.
Watch a Live Q&A we hosted on August 22, 2024, to discuss Panama’s Economy Today.
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