Panama has approved a reform to the 2007 Social Fiscal Responsibility Law (Law 34), setting new fiscal deficit limits. Under the revised law, the deficit will gradually decrease from 4% in 2025 to 1.5% by 2030. This measure aims to control debt growth, strengthen public finances, and ensure sustainable debt levels.
Economic projections for Panama
In 2023, the fiscal deficit stood at 2.99% of Gross Domestic Product (GDP), an improvement from 4.04% in 2022. Although data for 2024 is not yet available, government forecasts since August suggest that the deficit could once again exceed 4%.
During the 2020 pandemic, Panama modified this law to allow public deficit of up to 10.5%. However, the new reform outlines a gradual fiscal adjustment to prevent a severe economic impact. According to Minister of Economy and Finance Felipe Chapman, this fiscal approach is “prudent and responsible” and has been well received by international organizations.
Approval of the 2025 State Budget
Amid this economic scenario, the new Government of José Raúl Mulino has approved a conservative national budget for 2025, totaling $30.1 billion, one of the lowest in the past 25 years. Initially, the proposed budget was set at $26.08 billion, 15% less than in 2024, but it was later increased following recommendations from Panama’s Parliament.
This budget adjustment follows a period of strong economic growth, with Panama recording its highest GDP of the century in 2023, exceeding $80.2 billion and an average growth rate of 11.3% between 2021 and 2023.
Therefore, if you wish to establish your company in this growing country, do not hesitate to count on Auxadi to manage your company’s accounting, taxes and payroll in Panama. Additionally, we offer these services in more than 50 jurisdictions worldwide with 45 years of experience.
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All information contained in this publication is up to date on 2024. This content has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this chart without obtaining specific professional advice.No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this content, and, to the extent permitted by law, AUXADI does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this chart or for any decision based on it.