Panama’s growth in the first few months of 2025 exceeded even the most conservative expectations for most economic indicators.
The Central American country’s Gross Domestic Product (GDP) for the first quarter of the year increased by 5.2%, according to figures from the National Institute of Statistics and Census (INEC). The Monthly Economic Activity Index (IMAE), for its part, shows a cumulative growth of 6.1% between January and April. These are numbers that, in other contexts, would be celebrated and indicate a year of strong start for Panama business growth.
Sectoral Engines: Canal, Finance, and Agriculture
Three sectors, in particular, drove Panama’s economy during the first months of the year: the Panama Canal, the financial system, and the agricultural sector.
After the water restrictions that affected Canal activity in 2024, 2025 started showing a vigorous recovery in the interoceanic waterway. Between January and April, the number of transits increased by 33%; the volume of goods transiting the Canal increased by 35%; and toll revenues increased by 42%. These results not only reflect the Canal’s recovery, but its leadership in an economy whose logistics is the point of articulation of most economic activities—an essential driver of Panama business growth.
The financial sector also reported strong figures, growing by 7.1% in the first quarter. As of April, the industry continued to benefit from an active banking system that has responded agilely to the recovery in demand for credit, particularly in the commercial and public sectors.
With more moderate growth, the insurance industry also added its share to the performance of the financial sector. Written premiums between January and April grew by 3.7%, driven by double-digit growth in individual life insurance, personal accident, health, auto, and technical insurance. Although this behavior would indicate a greater awareness of insurance among certain segments of the population, this remains a major challenge to achieve greater penetration in this market.
The agricultural sector also showed its relative robustness during the first months of the year. It grew 6.6% in the first quarter and continued to do well through April. Pineapple exports led the sector with a significant growth of 114%; watermelon exports grew by 18%, coffee exports increased by 17%, and banana exports grew by 9.7%. This was made possible by a recovery in international prices of certain agricultural products, which benefited specific export segments and reinforced Panama business growth in rural areas.
Moderate Performance in Construction and Commerce
In construction and commerce, both with more modest growth, other sectors also showed good performance: electricity, gas and water generation and distribution increased by 4.5%, hotels and restaurants, which are closely related to the tourist sector, grew by 4.7%, and real estate grew by 3.6%.
In more specific figures, the GDP of the construction sector grew by 1.8% in the first quarter, while the GDP of the commerce sector grew by 2.9%.
Construction was driven, especially by public investment, while private activity has shown signs of weakness. Between January and April, the production of ready-mix concrete decreased by 7.8%; the production of gray cement decreased by 5.1%; and construction permits decreased by 12.1%. This behavior would indicate a difficult second half of the year for the construction sector and create additional pressure on Panama business growth in this key industry.
Commerce, for its part, showed a mixed reality: retail trade activity increased, supported in part by an increase of 11.8% in sales of new cars. Wholesale trade, in turn, had setbacks, with re-exports from the Colón Free Zone (ZLC) decreasing by 2.5%. The ZLC, which continues to face external restrictions, increasingly aggressive competition from other regional logistics platforms, and an urgent need to reinvent its business model, remains a critical component of Panama business growth that requires modernization and innovation.
A Question of Infrastructure
Port activity during the first four months of the year grew by 2.5%, a percentage far below the growth rate of 16.8% recorded in the same period last year. These numbers suggest that Panama’s logistical infrastructure could have reached a saturation point. While Panama continues to enjoy a strategic position in the global logistics matrix, the platform available today has already reached a certain level of maturity that will require, in the short or medium term, either an expansion of capacity or the building of new ports.
The geopolitics and global scenario has become increasingly complex and sensitive, and Panama’s ports are not exempt from that reality: international trade tensions, external pressures, and delicate negotiations regarding control and operation of some key terminals in the country.
The Labor Market Gap
The most worrying statistic, however, is the one related to employment. Between January and April, the number of labor contracts registered with the Ministry of Labor decreased by 0.3%. This would point to a lack of formal employment generation that fails to keep pace with Panama business growth. Informality in the labor market continues to predominate and threatens to become more entrenched in the national economy. The unemployment rate in 2024 was 9.5% and labor informality 49.3%.
A Strong Start, and Storm Clouds on the Horizon
Despite the strong start, the panorama is not free of risks. The approval of the reform to the pension program of the Social Security Fund unleashed a wave of social protests that directly impacted the pace of growth in several key sectors, such as construction, banana production, exports, public education, among other activities sensitive to social unrest.
Teachers, construction workers, banana producers and Indigenous peoples took to the streets to express their discontent. Demonstrations were held in various parts of the country, with the province of Bocas del Toro becoming the epicenter of the unrest. Infrastructure projects were temporarily suspended and rescheduled, and sectors such as tourism, transportation, and commerce were indirectly affected, among other sectors due to roadblocks, restrictions on mobility and logistical disarticulations in various parts of the country.
By way of reference, the province of Bocas del Toro would represent a percentage of about 2% of Panama’s GDP. Banana production, for its part, would account for about 0.5% of the country’s GDP.
Budget Reduction
An additional element that will impact Panama business growth in 2025 will be the recently announced cut of up to $1.9 billion in the national budget. The main cut would affect the Central Government, which would see its budget reduced by $1.536 billion. The objective of the measure would be to comply with the ceiling of the deficit established by the Social Fiscal Responsibility Law, which limits it to 4% of GDP for the current year.
Achieving this magnitude in a budget cut represents a very difficult challenge. After accounting for public debt servicing (principal and interest), the Central Government’s operating and investment budget would be $9.863 billion (before the adjustment). The announced cut, in this case, would represent a reduction of 15.6%.
The rigidity of public spending, special laws that encumber a large part of the budget, ongoing public investment projects, and a population that is increasingly demanding services and solutions, make this a move with very little room for maneuver.
Absent the negative events described above, Panama’s growth this year could have been as high as 6.0%. However, in the new context marked by social tensions and fiscal adjustments, the GDP will close the year with growth closer to 4.0%.
These new projections converge with the figures presented at the beginning of the year, which foresaw a temporary deceleration of the economy due to the public reaction against the reform of the pension program of the Social Security Fund.
How to Sustain an Inclusive and Sustainable Panama Business Growth
The economic performance of the country this year has confirmed, on the one hand, that Panama has structurally resilient sectors that are capable of withstanding adverse scenarios. But it has also demonstrated the country’s vulnerabilities: an economy that grows without generating sufficient formal employment, a budget under pressure, an impatient society, and a logistics model that approaches its limit unless expanded and modernized.
It is not a question of how much the country’s economy will grow, but how it grows and for whom. Maintaining the rhythm of Panama business growth in the coming years will require more than a series of encouraging numbers in the short term: it will require the structuring of an economy that, within the global context, is socially stable, fiscally sustainable, and strategically located.
Consensus has to be built, without losing sight of an essential truth: an economy that does not generate real well-being, decent employment, and social cohesion, no matter how much it grows, will remain stagnant in its contradictions.