Inflation in Panama

A short history of inflation in Panama

The Commodity Spike (2008)

Panamanian inflation peaked at 10.0% in the year to September 2008. What makes it worth noting is what was absent: Panama uses the US dollar, so none of that rise came through a falling currency. It was the world prices of food and fuel arriving directly, in an economy that imports both.

The reverse showed in 2020, when prices fell 2.5% over the year through one of the strictest lockdowns anywhere. A country without its own currency has no interest rate of its own to raise or cut, so its inflation is set by what it buys from abroad and by what is happening at home, and by nothing in between. Whether that brings American inflation with it is a separate question.

Post-Covid Inflation (2021 to 2023)

In Panama, prices rose fastest in June 2022, at 5.2%. The causes of the post-Covid inflation were global in nature, beginning with the lockdowns: factories and ports closed and the shipping between them fell out of sequence, so goods took longer to make and longer to arrive. Governments had spent heavily supporting household incomes through those closures, so when restrictions lifted there was money waiting to be spent and not enough on the shelves to spend it on. Then in February 2022 Russia invaded Ukraine, disrupting two of the world's largest suppliers of wheat, fertiliser, oil and gas at once, and the cost of everything grown, heated or transported rose with them.

Because the causes were shared, so was the timing: most countries peaked within a few months of one another in late 2022. The major inflation events covers this episode and the others in more detail.