Panama’s economy expanded 10.6 percent in the first quarter from a year earlier, fueled by government spending on infrastructure and expansion work on the Panama Canal, the Comptroller General said.
Economic growth accelerated from 9.6 percent in the fourth quarter, the agency said today on its website. Finance Minister Frank De Lima had earlier said the economy grew 10.4 percent.
Government spending rose 41 percent from the same quarter a year ago, a pace that is likely to continue and help drive 10 percent growth through the year, said Boris Segura, a Latin American strategist at Nomura Securities International. The International Monetary Fund expects the economy to expand 7.5 percent in 2012, making it the second straight year that the Central American nation would lead Latin America in growth.
“Panama’s fundamentals are fine overall,” Segura said in phone interview from New York. “High growth allows you to pay for this stuff.”
Panama’s $5.25 billion canal expansion project and public investments such as a $1.5 billion subway line for the capital are likely to promote above average growth for the next two years, according to Fitch Ratings. The economy risks overheating as labor markets tighten, Fitch said in a May 31 report.
“I don’t think you can ever grow too fast,” De Lima said in an interview today in Panama City. The economy should grow 10 percent this year as the government continues infrastructure investments, he said.
Annual inflation was unchanged at 6 percent in May. Panama’s unemployment rate hovers at 4.4 percent and companies are struggling to find workers, President Ricardo Martinelli said in an interview last month.
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