Panama's economy has long been intertwined with the economy of Panama City due to  the canal and its politics having close proximity to that of the USA. The economy relies on transportation and logistics services. As a result of public debt becoming more than $37 billion in 2016, the government is now betting on investments and the expansion of the canal.

Panama also has a reputation as a go-to country for offshore banking, which has warranted global pressure for reform. The Panamanian government has made efforts to comply with that pressure and implement new laws to stifle money laundering. However, corruption persists.

Panama's U.S. dollar-based economy is one of the fastest growing in Latin America. This is due to the expansion of the canal and other modifications to the public infrastructure of mostly Panama City. A strongly developed service sector accounts for more than a third of the GDP. Unfortunately, one quarter of the population still lives below the poverty line.

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The top income tax rate for both personal and corporate is 25 %. Other taxes are value added and capital gains. In recent years, the domestic income tax has averaged 15.8 %. Government spending averages about 23 % of the total output (GDP), the budget deficits have equaled about 2.6 % of the GDP and public debt is almost 40 % of the GDP.

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