Panama’s construction industry will end 2025 with growth nearly identical to the previous year, reflecting a significant stall. The sector’s performance was hampered by work stoppages on residential housing projects, operational adjustments, and administrative delays that limited its dynamism throughout the year. This stagnation occurred even as the broader national economy maintained a recovery trajectory with an estimated Gross Domestic Product (GDP) growth close to four percent.
Alejandro Ferrer Solis, president of the Panamanian Chamber of Construction, confirmed the sector’s flat performance this week. He explained that while the overall economy is recovering, construction has experienced only cyclical and moderate activity without any meaningful expansion compared to 2024. Data from the National Institute of Statistics and Census (Panama) supports this view, showing accumulated GDP for the first half of the year reached a preliminary growth figure of 4.3 percent. The construction sector barely managed to sustain itself at levels similar to the previous year during that same period.
“The sectorial brake was marked by several factors,” Ferrer stated. [Translated from Spanish]
He detailed a confluence of challenges that created a perfect storm for the industry. Labor paralyses and operational adjustments between April and May interrupted critical projects. These disruptions affected supply chains and measurably reduced overall productivity. The state also accumulated delays in paying its obligations, particularly those related to fiscal credits for preferential interest. That situation created severe liquidity pressures for developers, contractors, and banks alike. A persistent backlog in housing incentives further limited the full reactivation of residential and commercial projects.
Investment Figures Reflect Sector Contraction
The financial data reveals the tangible impact of these headwinds. The total value of both residential and non-residential construction and repairs from January through September this year reported a decline of 2.1 percent. It fell from 743.08 million dollars in the same period of 2024 to 727.13 million dollars in the first nine months of 2025. Residential housing construction bore the brunt of this contraction.
Approximately 454.57 million dollars of the total construction value in the last nine months corresponded to residential housing. That figure represents a sharp 12.4 percent decrease compared to the 518.95 million dollars generated in the same months last year. The downturn was not evenly distributed geographically. The value of residential construction plummeted by 65.9 percent in Colon. It fell 63.6 percent in the area encompassing Aguadulce, Chitre, David, La Chorrera, and Santiago. Arraijan experienced the most severe drop at 82.7 percent.
This widespread decline directly reflects the sector’s contraction due to uncertainties surrounding the Preferential Interest Law. The mid-year paralysis of mortgage loans for bank-subsidized housing brought many projects to a standstill. The industry is now seeing a potential turnaround. Ferrer pointed to a confirmed reactivation of financing for homes under the Preferential Interest Law by the Panama Banking Association toward the third quarter. This development has allowed numerous projects paralyzed between 2024 and 2025 to resume their progress.
“Facing a proposal for a law to provide incentives for the used housing market, it is fundamental to analyze the impact it could have, because state resources are limited,” Ferrer warned. [Translated from Spanish]
He stressed the need for careful consideration of any policy shifts that could divert finite government funds from new construction. On public works, Ferrer noted that despite budget limitations, the state has maintained investments in health, education, roads, transportation, and social housing. He identified an urgent need to improve inter-institutional coordination to guarantee basic services like potable water. This utility is a critical factor for enabling new real estate developments and a persistent challenge for the sector.
Public Private Partnerships Key to 2026 Momentum
The future dynamism of the industry now appears heavily reliant on new models of investment. The president of the construction guild highlighted that Public Private Partnerships, or APPs, will be decisive for launching new works in 2026. This is especially true for road infrastructure and strategic projects the country requires to improve its competitiveness. He identified specific initiatives like the East Pan-American Highway and the future West Pan-American Highway as concrete opportunities to accelerate investment and generate employment.
“Public Private Partnerships are essential for closing infrastructure gaps and maintaining the country’s economic dynamism,” he said, signaling a clear path forward for major projects. [Translated from Spanish]
Panama still faces significant challenges that limit full participation in this model. Ferrer emphasized that modernizing processes, advancing institutional digitalization, and improving coordination between public entities are non-negotiable needs. These steps would reduce delays and provide greater certainty to investors. He also reminded officials that the state’s compliance with its payment schedules is key to strengthening trust. This reliability ensures that APPs can be executed with both efficiency and long-term sustainability.
He expressed a specific desire for local companies to benefit from these large-scale projects.
“The only thing we could point out from the Chamber is that we would like this legal framework for the APPs to permit the participation of Panamanian companies. If some consortium could be formed, and we understand that the APPs that have been awarded exceed 250 million dollars, an important figure for companies the size of our market, we want to find a way for national companies to participate as consoralejandro ferrertiums,” Ferrer expressed. [Translated from Spanish]
Employment and Productivity Challenges
The human capital dimension of the construction sector remains vast. Ferrer reiterated that the industry currently employs more than 149,000 workers. This figure equates to eight percent of all formal employment in Panama. Maintaining and growing this workforce is a central concern for the coming year.
A key part of the challenge this industry faces involves elevating productivity through targeted training and development programs. The sector must adapt to new technologies and methods to remain competitive. Improving worker skill sets is seen as essential for executing the complex projects slated for the APP pipeline. The overall health of the construction sector is a reliable barometer for Panama’s wider economic vitality. Its projected improved dynamism for 2026 offers a cautiously optimistic signal after a year of standing still.