In most urban areas of Panama, particularly in Panama City, tap water is treated and considered safe to drink. The country has relatively modern water infrastructure in cities, and locals commonly drink it without issues.
However, water quality can vary depending on the region. In rural areas, islands (like San Blas), Colon, the countryside (Los Santos, Veraguas, Cocle, Herrera, etc) and some beach destinations, the water may not be treated to the same standard or may come from local sources such as wells or rainwater systems. In these places, it’s recommended to drink bottled or filtered water.
Travelers with sensitive stomachs may also prefer bottled water, even in cities, as a precaution. Many hotels, restaurants, and Airbnbs provide filtered water or bottled options.
Overall, if you’re staying in major urban areas, tap water is generally safe, but when in doubt, especially outside the city, go with bottled or filtered water.