UBS Raises Panama’s 2026 Growth Forecast to Around 5%

  • Panama’s economy appears to be entering a stronger growth phase as confidence improves and the major sources of uncertainty that weighed on activity over the past two years begin to fade, according to UBS.
  • UBS estimates that Panama’s real GDP will grow by around 5% in 2026, driven by increased household consumption, the recovery of the construction sector, tourism and activities related to the Panama Canal. The firm highlighted that growth reached 5.5% in H1 2026, the strongest performance among major Latin American economies during the period.
  • The report also highlighted an improvement in Panama’s fiscal accounts. UBS described the adjustment made by the authorities as “one of the firmest and deepest in recent years among the economies of the Americas,” supported by a reduction in the fiscal deficit and a more stable debt trajectory.
  • Panama maintains a favourable position due to the strength of its dollarised system and the increase in private deposits. Since 2024, private sector deposits have increased by approximately US$5Bn to US$6Bn annually, equivalent to about 5% of GDP. However, UBS noted that this liquidity has not yet translated into greater local credit growth.
  • Although President José Raúl Mulino’s popularity has declined significantly, UBS noted that the administration has advanced key reforms, improved fiscal performance and maintained strong relations with the United States.
  • The Panama Canal also remains a core source of support for the economy. It is expected to remain an important contributor to economic and fiscal activity. Notably, the Panama Canal Authority is projecting US$5.56Bn in revenue and US$3.61Bn in contributions to the national treasury for FY2027, US$414Mn above the amount approved for FY2026. However, potentially difficult water conditions and the possibility of a strong El Niño present downside risks to Canal activity, which could temper one of the key drivers of Panama’s stronger growth outlook.

(Sources: News Room Panama & Reuters)