March 1, 2013 / 7:01 PM / in 5 years

CORRECTED-(OFFICIAL)-UPDATE 1-Panama records 2nd year of double-digit growth in 2012

(Corrects 2011 growth, removes references to 2007)

* Panama economy grows 10.7 percent in 2012

PANAMA CITY, March 1 (Reuters) - Panama’s economy notched its second consecutive year of double-digit growth in 2012, driven by a $5.25 billion expansion of its canal and the development of Central America’s first subway.

Panamanian growth reached 10.7 percent in 2012, the government statistics agency reported Friday, compared to 10.8 percent in 2011. Growth in the fourth quarter was 10 percent from the same period a year earlier.

The tiny Central American country’s economy has largely evaded the global recession, expanding at double-digit rates for four of the past six years.

Much of the growth is credited to significant public infrastructure spending, including the ongoing construction, begun in 2007, of a third lane in Panama’s trademark canal. It is expected to increase Panama’s gross domestic product by about a third over the next decade.

Logistical and transportation services linked to the canal have grown in importance over the past six years and the government is expected to begin the construction of a third port on the Pacific this year.

Strong government spending translated into a deficit of 2.1 percent, which some analysts find worrying given rapid growth.

High spending and Panama’s dollarized economy also fanned inflationary pressures, with consumer price index gains hovering around 6 percent for much of 2012, even though recent months saw a decline. (Reporting by Lomi Kriel; Editing by Krista Hughes and James Dalgleish)

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