Panama 'BBB-/A-3' Ratings Affirmed; Outlook Remains Stable

  • S&P Global Ratings (S&P) affirmed Panama’s ‘BBB-/A-3’ sovereign credit ratings on September 22, 2026, and maintained a Stable Outlook, reflecting expectations of continued fiscal consolidation, resilient economic growth and broadly consistent pro-business economic policies.
  • Economic growth remains a key credit strength, according to S&P, with Gross Domestic Product (GDP) expected to expand 4.5% in 2026, supported by strong Panama Canal activity, recovering construction, air transportation and tourism. Furthermore, growth is expected to average around 4% over 2027-2029, although a severe El Niño event could weigh on Canal activity in 2027 by reducing rainfall and Gatun Lake water levels.
  • Panama’s fiscal position is also improving, supported by revenue efficiencies, expenditure rationalisation, lower capital spending and higher contributions from the Panama Canal. S&P expects the general government fiscal deficit to narrow to around 3% of GDP from 2027, with net general government debt stabilising at approximately 55% of GDP over 2026-2029.
  • Despite the improving fiscal trajectory, Panama’s fiscal flexibility remains constrained by its low tax revenue base and spending rigidities. Tax revenue is only 6.9% of GDP, while limited capacity to implement broader tax or expenditure reforms could slow fiscal consolidation. Meanwhile, elevated external debt and Panama’s lack of monetary flexibility remain rating constraints. Against this backdrop, further fiscal consolidation that meaningfully reduces public debt and strengthens fiscal buffers could support an upgrade, while policy setbacks that slow deficit reduction or weaker-than-expected economic growth could place downward pressure on the ratings over the next 12-24 months.
  • Looking ahead, Panama’s strategic position and diversified services economy should continue to support its credit profile, with the Panama Canal, tourism and air transportation underpinning current account surpluses, while geopolitical disruptions are increasing the country’s importance as a global logistics hub. Potential reopening of Minera Panamá could also provide additional growth, export and fiscal benefits, although S&P has not incorporated these potential gains into its forecasts.

(Source: S&P Global Ratings)