Panama Cuts 2025 Deficit to 3.7%, Keeps Baa3 Rating as Moody's Flags Investment Cuts
Updated
Updated · newsroompanama.com · May 30
Panama Cuts 2025 Deficit to 3.7%, Keeps Baa3 Rating as Moody's Flags Investment Cuts
1 articles · Updated · newsroompanama.com · May 30
Summary
Moody’s said Panama narrowed its 2025 non-financial public sector deficit to 3.7% of GDP from 6.2% in 2024, beating the 4.0% legal ceiling while keeping its Baa3 sovereign rating.
More than 2% of GDP in spending cuts drove the improvement, largely by halting new infrastructure projects and restructuring existing works rather than through lasting revenue or current-spending reforms.
The negative outlook remains because Moody’s sees risk in relying on capital-spending cuts that may undermine long-term growth and prove hard to repeat as postponed projects return.
Q1 2026 brought a 1.4% deficit, helped by strong tax collection and tight current-spending control, supporting Panama’s 3.5% full-year target under its fiscal rule.
Moody’s expects growth and higher Panama Canal contributions to aid revenues, with public debt stabilizing around 66%-67% of GDP by 2027 if deeper tax and budget reforms advance.