Panama City is gaining a lot of traction with travelers as a cheaper alternative to Costa Rica that offers much more history and culture in addition to a tropical setting. It’s true that costs are generally lower than in Costa Rica, but that may not last much longer if this surge in popularity continues.
Hotels and hostels in Panama City are good bargains, especially on the lower end of the price range. On the higher end the best deals are outside of the peak holiday season, but all year round you can get good prices on lovely hotels that would cost far more in most places.
Food and drinks are bargains too, and especially if you concentrate on street stalls and other places catering toward locals. Restaurants with English-language menus in tourist districts might not seem cheap at all.