Moody’s Maintains Panama’s Rating at Baa3

• Moody’s Investor Services (Moody’s) has maintained the Republic of Panama’s sovereign rating at Baa3 with a negative outlook following the completion of its periodic review. This is unchanged from the previous assessment. According to the Moody’s report, Panama’s rating is supported by its strong economic growth, the strategic role of the Panama Canal, and its track record of sustained investment, all of which continue to support the country’s macroeconomic resilience.
• Panama’s economic growth remained at 2.9% in 2024, despite the negative impact of the closure of the Cobre Panamá mining project. Against this background, Moody’s projects a 4.0% recovery by 2025, driven by increased Canal activity and a dynamic private sector.
• However, Moody’s highlighted that the pension system reform, while strengthening long-term sustainability, entails greater fiscal contributions from the State, which could limit room for maneuver on other budgetary fronts.
• Furthermore, the fiscal deterioration observed in 2024, when the deficit reached 7.4% of Gross Domestic Product (GDP) and public debt rose to 62% of GDP from 56% in 2023, poses significant challenges for fiscal consolidation. Although the government has shown a willingness to implement structural reforms, including the recent approval of the pension system reform, budgetary rigidities persist that could hinder a substantial deficit reduction in the short term.
• The negative outlook reflects the risks associated with a likely stagnation in fiscal consolidation and the possibility of rising sovereign financing costs, if the credibility of fiscal policy is not strengthened. The rating could be stabilised if the government succeeds in implementing credible measures to reduce the deficit and improve fiscal transparency.

(Source: Newsroom Panama)