Panama continues its investment in infrastructure and enjoys continued overall growth in its economy.  Despite the deficit spending, Panama’s debt remains at around 40% of GDP down from historic highs of 70% before the boom started.  This in from Reuters

Highways, subway, canal expansion on the works

Feb 14 (Reuters) – Panama’s budget deficit widened to the equivalent of 2.3 percent of the country’s gross domestic product in 2011, the country’s Finance Minister Frank De Lima said on Tuesday.

Panama’s third consecutive budget deficit comes amid heavy infrastructure spending, as the fast-growing Central American nation rushes to improve outdated streets and highways and build a $1.8 billion subway in the traffic-gnarled capital.

De Lima said the widening budget was partly due to an 18.3 percent increase in subsidies, which include curbing citizens’ electric bills that have been hit by high oil prices.

Panama’s booming economy topped Latin America with an estimated 10.5 percent GDP expansion in 2011, continuing a robust growth trend that began in the middle of the last decade.

Boosted by the $5.25-billion expansion of its landmark Panama Canal, bustling ports, multinational investment and tourism, Panama’s diverse services economy is expected to expand by 7.5 percent this year, said De Lima.

Though Panama’s overall debt has climbed steadily under President Ricardo Martinelli, the country’s debt-to-GDP ratio should continue to shrink to 35 percent of GDP by 2015, said De Lima. In 2004 debt was equal to around 70 percent of GDP.

Deficits were 0.9 percent of GDP in 2009 and 1.9 percent of GDP in 2010. The widening trend is set to reverse, said De Lima.

The deficit for 2012 is projected to be equivalent of 2.0 percent of GDP, he added, in line with fairly strict deficit laws that are closely watched by the sovereign debt ratings agencies that have rated Panama’s debt investment grade.