* Economy expands 1.2 pct versus second quarter
* Government forecasts 2012 growth at 4 percent
MONTEVIDEO Dec 13 Uruguay's economy grew at a slower year-on-year rate in the third quarter, but the pace of expansion picked up from the previous quarter as power generation recovered from a drought.
The South American country's small economy grew by 3.0 percent year-on-year, the central bank said on Thursday, down from a revised rate of 3.9 percent in the second quarter.
Uruguay's gross domestic product is expected to grow by 4 percent this year and in 2013, according to official forecasts, but some private analysts think that looks overly optimistic as sluggish growth in larger neighbors Brazil and Argentina takes a toll.
GDP grew 1.2 percent in the third quarter from the second quarter as electricity generation recovered, the central bank said. In the second quarter, GDP rose a revised 0.7 percent from the first quarter.
Dry weather pummeled activity in Uruguay's electricity, gas and water sectors during the second quarter. That increased reliance on thermal power generation instead of hydroelectric generation and drove up costs.
Construction, transport, warehousing and communications supported the economy, the central bank said.
Private-sector consumption rose by 5.7 percent year-on-year, inching down from the previous quarter's rate of 5.9 percent.
Despite slower growth rates, inflation remains a concern for policymakers in Uruguay. Consumer prices rose 9.03 percent in the 12 months through November, slowing a touch from October's 9.11 percent reading, but still outside the central bank's target range of between 4.0 percent and 6.0 percent.