UPDATE 1-Uruguay GDP growth cools to 3.9 percent in 2012

Wed Mar 27, 2013 5:09pm EDT

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MONTEVIDEO, March 27 (Reuters) - Uruguay's economy expanded 3.9 percent in 2012 vs a revised 6.5 percent a year earlier, buoyed by booming construction activity and strong growth in the transportation and communications sector, the central bank said on Wednesday.

It was the 10th straight year of growth in gross domestic product, despite a 1.3 percent decline in farming and cattle-ranching - the traditional mainstays of this small South American economy.

In the fourth quarter, GDP grew 4.8 percent from a year earlier, speeding up from a revised 2.9 percent expansion in the third quarter.

The economy contracted 0.1 percent in the fourth quarter versus the third quarter, however, compared with a revised 1.6 percent quarterly expansion in the July-September period.

Despite slower growth rates, inflation remains a concern for policymakers in Uruguay. Inflation slowed slightly in 2012 to 7.48 percent but was still well above the central bank's target range of 4.0 percent to 6.0 percent.

The central bank raised its benchmark interest rate by 25 basis points to 9.25 percent in December and then held it there in March.

Before Wednesday's revisions, the bank had reported 5.7 percent growth for 2011.

The government has forecast 4 percent growth for 2013, but some private analysts view this as a bit too optimistic as sluggish growth in larger neighbors and key trade partners Brazil and Argentina takes a toll.

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