Panama's Growth Revised Up on Mining, but Domestic Consumption Slows and Luxury Spending Bears the Brunt

• BMI expects Panama's real GDP to grow 3.8% in 2026, an upward revision from an initial 3.0% forecast driven largely by higher investment and mining activity. The government's decision to authorise First Quantum Minerals to remove and process stockpiled ore at the Cobre Panama mine is expected to provide a short-term boost to several macroeconomic figures. Even so, structural conditions remain weak, with domestic consumption showing strong volatility and averaging just 1.8% annual growth between 2020 and 2025.
• Data on consumer prices, imports of consumer goods and vehicle sales point to both a slowdown in domestic consumption and a shift in spending patterns. Imports of consumer goods opened the year with one of the sharpest year-over-year declines of the past five years, yielding a modest 2.1% average growth rate in the first quarter and extending the soft 1.3% expansion recorded in 2025.
• Subdued import activity has fed through to consumer prices, with inflation remaining weak for two consecutive years, negative 0.2% in 2024 and 0.3% in 2025, and only beginning to tick up on higher fuel prices linked to the US-Iran conflict. Soft inflation across key categories such as food and beverages, clothing and housing underscores the persistent weakness in household demand.
• BMI's forecast assumes a moderately better scenario for private consumption from 2026 onward, though households are expected to stay budget-constrained and to favour essential goods and services over luxury items. Downside risks include the external geopolitical backdrop, climate effects, chiefly El Niño and its impact on transit through the Panama Canal, and the potential for internal social unrest to weigh on activity, employment and consumer spending.

(Source: BMI, A Fitch Solutions Company)