Which Central American country will be the leader of economic growth in the region by 2025? The Economic Commission for Latin America and the Caribbean (ECLAC) has just released the answer.
Panama to Lead Growth in Central America with 4.1% GDP Expansion
In its 2025 Annual Update, the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) shows that Panama will grow by 4.1% this year, consolidating itself as the fastest-growing economy in Central America and the subregion’s great outperformer against a Latin America and Caribbean average of 2.4%.
Panama thus not only heads the ranking of the Central American economies but also of the most dynamic Latin American countries according to ECLAC, coming in fourth overall, just behind Venezuela (6%), Paraguay (4.5%), and Argentina (4.3%).
Growth Rates in Central America
In the Central American subregion, Panama is followed by Costa Rica, which is expected to grow 3.8% this year. Third place is a tie between Guatemala and Honduras, with projected growth of 3.7%. Nicaragua will register 3.1% growth, and El Salvador will post the region’s lowest GDP increase with 2.7%.
The projections for Panama and Costa Rica are significantly higher than the 2.6% average forecast for Central America in 2025 or the 1.0% for Central America and Mexico combined, reflecting the slowdown of the Mexican economy. This confirms that the economy in Central America remains uneven, with Panama and Costa Rica driving regional expansion while other nations face slower growth trajectories.
Drivers of Panama’s Economy
The services sector is still the main driver of Panama’s GDP, with the Panama Canal as its flagship project. In its Fiscal Year 2025, which ended in March 2025, Canal revenues rose by 14.4% to USD 5.705 billion, above budget.
The other big winner has been the transportation, storage, and communications sector, which has again posted excellent results this year due to higher Canal toll revenues, increased net tonnage, and container traffic throughout the National Port System. The logistics industry alone represents about 30% of Panama’s Gross Domestic Product (GDP), and it is no exaggeration to say that this is the bedrock of the Panamanian economy.
The financial intermediation sector has also posted a positive performance this year, with growth in both deposits and loans at the national level, consolidating Panama as the largest financial center in Latin America. During the first semester of 2025, Panama exported USD 9.762 billion worth of services, which represented a year-on-year increase of 8.3%.
Travel and tourism are also on the rebound, after posting positive results. Panama generated over USD 3.307 billion in travel services between January and May 2025, a 4.1% increase in international visitor arrivals over the same period a year ago.
The subregion has also been fueling demand, with remittances from abroad up by 15.1% in the first quarter of 2025 compared to the same quarter of 2024. According to official figures, Panama’s principal remittance source countries are the United States, the United Kingdom, Venezuela, Colombia, and Costa Rica.
Regional Outlook
Latin America and the Caribbean as a whole continue to be caught in what ECLAC defines as a “low-growth trap.” The average annual growth rate hovers around 2%, a number characterized by “persistent low investment, low productivity, and slow job creation,” in the words of the United Nations Economic Commission.
Sluggish external demand drivers have also lost some steam, as the region continues to expand at a slower pace, in a highly complex international environment with U.S. tariff announcements and high global uncertainty. Looking forward, ECLAC forecasts an average growth rate for Central America of 3.2% in 2026, with Panama leading again with 4.6%, followed by Guatemala (4.0%), Honduras (3.8%), Costa Rica (3.7%), Nicaragua (3.4%), and El Salvador (2.7%).
The United Nations body explains that to break out of this low-growth scenario, Latin America and the Caribbean must “accelerate the pace of productive transformation to increase economic growth and productivity, diversify its economies, and generate more and better jobs.” Strengthening the economy in Central America will depend mainly on innovation, diversification, and integration across regional markets.
The Panamanian Economy: 10 Years of Resilience
Panama’s excellent performance is not a coincidence. Between 2010 and 2022, the Panamanian economy grew at an annual average rate of 5.7%, outperforming many of its Central American peers.
It was one of the few countries in the world, and the only one in Latin America, that was able to grow even during the COVID-19 pandemic. GDP grew by 15.8% in 2021, by 10.8% in 2022, and by 7.4% in 2023.
This resilience is the result of a number of structural factors that differentiate the Panamanian economy: the strategic geographic location of the country as a natural bridge between North and South America; a services sector that accounts for more than 75% of GDP; a dollarized economy, which guarantees the stability of the exchange rate; and the sustained investment in first-class infrastructure (ports, airports, and logistics centers).
President José Raúl Mulino announced a record investment plan to boost the economy of more than USD 11 billion in the coming years, focused on the development of an energy corridor that will cross the isthmus, as well as new port terminals and a highway that will connect the Atlantic and Pacific coasts, all projects that will generate around 40,000 jobs during their construction phase.
The Situation in the Region
The rest of Central America is moving at a much more pedestrian pace, with a number of structural challenges that it must face up to as a matter of urgency. The ECLAC report highlights that the subregion is highly vulnerable to external shocks, given its structural dependence on the U.S. economy for its trade, finance, and migration.
Costa Rica, which comes in second in the ECLAC growth ranking, is being driven by strong domestic consumption and expansion of the technology and advanced manufacturing sectors. Guatemala has also maintained a favorable outlook due to its services sector, private consumption, and remittance inflows. Honduras, in turn, has grown thanks to a solid coffee industry, controlled inflation, and international reserves of more than USD 8 billion.
The challenge for the rest of Central America is to diversify the productive matrix, de-emphasize dependence on traditional low-value-added sectors, and increase capacity for innovation to make a move from reactive to proactive economic growth. A coordinated regional strategy could help strengthen the economy in Central America, enabling it to achieve more balanced and sustainable development across all member nations.