The game was goalless and largely devoid of clear chances in a cautious first half at Toronto Stadium, with both sides knowing the loser would be eliminated. Croatia manager Zlatko Dalić made a decisive double change at the break, withdrawing Petar Musa and Joško Gvardiol for Andrej Kramarić and Budimir, and the fresh impetus transformed his side.
Budimir made an almost immediate impact, converting nine minutes into the second half after Josip Stanišić delivered an excellent cross to the far post. The substitute read the delivery perfectly, prodding home to give Croatia the lead their second-half performance had deserved.
Croatia were almost immediately denied a second when Marko Pašalić was played clean through only for his delicate chip to be saved by Panama goalkeeper Luis Mosquera. Dominik Livaković was called into sharp action at the other end as Panama poured forward seeking an equaliser that would have preserved their hopes. The Croatian stopper held firm throughout a determined late push.
Panama are eliminated after two consecutive 1-0 defeats — they also lost their opener to Ghana — and face England in a dead rubber on Saturday. Croatia move into the final Group C matchday against Ghana needing a result to seal their spot in the round of 32. A Ghanaian side emboldened by their point against England will provide a stern test.
The victory is built on the resilience that carried Croatia to the 2018 World Cup final, though the loss to England in the opening match had threatened to derail their campaign before it began.
Dalić was relieved but candid about a difficult first half.
"It was a tough and fighting match against a dangerous opponent. We didn't manage to do much in the first half, but we were much better in the second.
"Three points and we are still in the game. There were difficult moments, we needed this win to lift ourselves."
Panama coach Thomas Christiansen remained proud of his side despite the exit.
"We played well. We fought until the end, staying true to our identity and the only thing I can say is that I am proud of my players. They played a great game, we went toe-to-toe with Croatia. That's just how football goes. They had one clear chance and scored it.
"The truth is that they did not create too much danger against us. I think we were brave in this match and once again, I'm proud of the boys."