Spanish is the official language of Panama. Despite the long American presence in the Canal Zone, English is far less widely spoken than most visitors expect. Former "Zonians" and people in international banking tend to be bilingual, but the average Panamanian on the street speaks little or no English.
Panamanian Spanish is fast, with a habit of swallowing the letter 's' — a feature shared with several Caribbean-influenced dialects. Slang runs deep, as it does across Central and South America, so even fluent Spanish speakers may need a little adjustment time. If your Spanish is rusty, a few key phrases will go a long way outside Panama City's tourist areas.